4 things you should consider when switching banks

Note: This is a guest post by Allan Jones. Some of the information below may or may not apply to your home country, state, or providence. Please see the banks policy, procedures, and penalties information prior to making any changes.

You may be required to change banks when you move to a new location if you require the services of a local bank. Alternatively, you may be unhappy with your existing bank and hence would like to switch banks. Whatever the reason, it would be worthwhile to evaluate the following four key aspects before you make a decision to move out of your existing bank.

First,  you may considering shifting to a new bank because your existing bank has started charging some extra fees; for example, the $5 monthly debit card fee. You may also be more tempted to change banks because the Occupy Wall Street movement gained so much momentum last year. WIth the organizers designating November 5, 2011 as ‘bank transfer day,’ it may make you all the more eager to want to switch from a larger bank to smaller banks or credit union. Though you might be tempted to shift to a new bank, you may want to talk to your existing bank and let them know that you are contemplating making the switch due to the hike in fees. 

It would be pertinent to note that many banks have started charging extra fees towards debit cards to offset the loss arising out of change in regulation that cut financial institutions’ fees by half. Hence, there is no guarantee that your new bank won’t charge extra fees in the near future. 

Secondly, if you shift your bank account within 90 days to 6 months of opening your account, some banks and credit unions may charge extra fees. Hence, if you shift your bank account either from your existing or new bank within a period of 90 days to 6 months, you may be subjected to an extra fee.

Thirdly, before you decide to switch banks,  consider the rules and regulations you already have with your existing bank towards online bill payment and direct deposit. If these are very few, you may contemplate a shift. On the contrary, if you have a large number of such instructions, you may better think about the consequence of failed online bill payment or direct deposit before deciding to shift to a new bank.

Fourthly, if you decide to switch banks, you may evaluate the various options before moving to a new bank. You have several options to choose from: such as large banks, small local banks, credit unions, and online banks. It might be beneficial for you to choose online-only banks, such as the  Australian National Bank , ING Direct, or RaboBank. You may be able to save good money and benefit from the higher interest rates offered on their checking accounts verses their lowest-cost checking accounts.

However, online-only banks may not be the right option for you if you are needing to deposit a large number of checks which may have to be mailed to them.

Whatever option you choose, It may be wise to keep the above points in mind before contemplating your shift to a new bank. Such shifts could be a major process and any mistake could cost you money.

Allan comes to us from Australia and we are grateful to get to feature his work. Allan has been blogging about frugality for the last 3 years and has published numerous articles on various personal finance topics. Alan has also contributed several articles for the Australian National Bank,  as well as on various personal finance forums.