There are many reasons to consider switching banks. High-pressure sales tactics and unexpected charges for services have long been triggers that send consumers looking for another bank, according to a recent J.D. Power study. Others include excessive or erroneous fees as well as too few branches or ATMs.
But here’s a positive reason to consider a switch: A new report published by S&P Global Market Intelligence says that banks are likely to begin passing along higher interest rates to depositors with savings and checking accounts by the end of the year.
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“If you want to get the best possible rate, you can shop for it just like you do for a hotel deal,” says Chris Vanderpool, a senior analyst at S&P Global Market Intelligence. Websites such as Bankrate, for instance, let you scour the interest rates offered by many banks.
In addition to higher rates, banks are offering perks to get your business. Chase, for example, will give you up to $500 if you move your money from another bank into a Chase savings or checking account. TD Bank is offering a $300 bonus if you open a TD Premier checking account. In both cases, there are some additional requirements.
Before you make the switch, however, check out our recent survey of the best and worst financial institutions. We polled more than 72,000 Consumer Reports members last summer to get their views on 148 financial institutions, including 69 traditional banks, 70 credit unions, and nine online banks.
They weighed in on a number of factors, such as customer service, wait times to see a teller, how easy it is to use the bank’s website and mobile app, and the convenience of hours and locations.
Steps to Take
If you decide that you want to switch banks, here are the steps you should take.
1. Open a new checking account as a secondary one at your new credit union, virtual bank, or smaller regional or community bank without closing the existing account. For virtual banks, that’s a relatively easy online process; for the others, the process may take 30 minutes to an hour and require a deposit of $50 or less.
2. Contact your employer to move direct deposit of your paycheck to the new institution, while you’re waiting for your new debit card to come.
Direct deposit may also make you eligible for free checking. To get the new account up and running fast, you could use your old bank’s online or mobile-banking bill payment service, or the new Zelle money transfer service, to transmit funds to your new account. Or write a check from the old account to deposit into the new one—but see steps 3 and 4 first.
3. Stop automatic bill payments. This can be easily done via the internet if you’ve been using the bank’s online bill payment feature, where you control when so-called push payments are sent out. If you auto-pay by authorizing a payee to pull the payment from your account, you’ll need to contact the company and follow its procedures for stopping payment. Then we recommend that you never use the pull method again so that you retain complete control of your account.
4. Keep the old account open. Be sure to keep your old account open until the last check you wrote has been cashed or deposited and has cleared.
5. Set up additional account features. Familiarize yourself with the digital features you need at your new institution and activate them. That includes services such as online bill payment, mobile banking, Zelle and other peer-to-peer money transfers, and alerts.
6. Close the old account. Kiss your old bank goodbye by visiting your home branch in person. Zero out any remaining balance by having the old bank electronically transfer the funds to your new account or by obtaining a cashier’s check or cash. There should be no fee to close accounts you have had for more than a few months.
7. Move your other deposit accounts. If you also have a savings account or certificates of deposit at your current bank, you may want to consider moving them, too, especially if you’re getting a poor interest rate. You will have to wait for CDs to mature in order to move them. Shop widely for the best savings and CD rates.
You might also be inclined to move your mortgage, but that would probably involve refinancing. And that means closing costs that are usually about 2 percent of the loan amount. CR advises refinancing your mortgage only if it makes financial sense, which usually means finding a lower interest rate.