When Should You Change Your Bank?

June 06, 2010, By Steve Thompson 10 comments

The bank is where your money lives. You visit maybe once or twice a week to deposit cash, withdraw funds, make transfers or ask why the checks you ordered six weeks ago still haven't arrived, but you might not put much thought into why you bank at that particular institution.

Weighing the Pros and Cons

When deciding if it's time to switch banks, you must first determine what you value most in a financial institution. Men who lead busy, hectic lives, for example, might want to go with a bank that offers extended hours. Men who travel often look for banks that have locations in most cities around the country.

If you keep large sums of money in your accounts, you'll probably want a bank that offers a high interest rate on savings and money market accounts. Or perhaps you're more interested in perks like free safety deposit boxes, checks and money orders.

If you haven't evaluated your options lately, or if you chose your current financial institution based on its proximity to your home, it might be time to change banks — or at least to look around to see what more is out there.

Beyond Banks

When changing banks, it is a good idea to look beyond the traditional banking options. You might not find what you're looking for, but at least you'll know you considered everything.

Community and regional banks are financial institutions located and based only in a specific geographical area. These are great choices if you want to support local companies and you like the idea of being more than an account number to the managers, tellers and other employees.

You'll probably find more personalized service at a community bank, but you might pay more in fees and service charges. These banks don't always have as many account options as their nationwide or international counterparts, so it will probably take more research to find what you want.

Credit unions are another option when changing banks. Unlike banks, credit unions are non-profit or not-for-profit organizations controlled by the members who use their services. They are often affiliated with religions groups, unions and other organizations, and may be limited to members of those groups, but there are an increasing number of credit unions available to the public. 

According to SmartMoney.com, you'll find that credit unions offer higher interest rates and fewer fees than traditional banks, but fewer locations and ATMs mean that they aren't necessarily as convenient.

Then you have the big banks which span the entire United States and have millions of customers. These banks are more convenient because there are more locations, ATMs and bankers, but they are also less personal than credit unions and community banks. The tellers probably won't remember your name when you walk through the door.

Big banks usually have more options with regard to accounts, savings plans, investments and financial assistance. You can walk into any branch and access your accounts, and you'll be able to find a branch if you're on the road when you suddenly realize you're short on cash.

You'll also spend less on ATM fees if you go with one of the big banks because their terminals are everywhere. And sometimes big banks are more stable than smaller institutions, which might mean your money is safer.

When You Shouldn't Change Banks

It is a good idea to consider changing banks every few years after conducting some market research and seeing what other options have opened up. But you might discover that you've got the best deal where you currently keep your accounts.

One of the major benefits of not changing banks is maintaining a long account history. When you sit down with a banker, they can access your entire history of deposits, withdrawals, transfers and other events. Some consumers also find that it is easier to obtain a loan if they have established a long financial history with a bank.

You cannot decide if you should change banks until you have taken the time to evaluate and comparison shop. Take a pad and pen, and actually visit a few other banks and credit unions. You can take notes and compare the responses later.