5 reasons switching banks may be worth it

Many Americans develop a long-term relationship with their bank, often sticking with the same checking account for 19 years and a savings account for nearly as long, according to a Bankrate survey. That loyalty can be costly: A low-rate savings account can mean you lose out on interest each year, and avoidable monthly fees can add up to hundreds more. 

Often, it’s the hassle of research or updating direct deposits that keeps people from switching — or just habit. But moving your money doesn’t have to be complicated. Comparing your current bank with alternatives might turn up higher yields, better digital tools, better ATM access and other perks. Consider all of the reasons to switch before letting another year slide by with the bank you’ve always had.

1. Higher APYs on savings

Remaining with your current bank could mean you’re earning a significantly lower annual percentage yield (APY) than you could be. Many savings accounts — especially at large, traditional banks — pay next to nothing; the national average savings account yield is just 0.62% APY, according to Bankrate data. 

Competitive yields on savings accounts are often found at online banks, which don’t bear the cost of maintaining branches and can pass along the savings to customers in the form of higher rates.

Check out Bankrate’s best high-yield savings accounts, which currently offer rates above 4% APY — well above the rock-bottom yields offered by many traditional banks.

2. Fewer fees (or no fees)

Sticking with your current bank could also cost you through fees. Some banks waive monthly maintenance fees if you keep a minimum balance or set up direct deposit, but if yours doesn’t, those charges can quietly eat into — or wipe out — any interest you’re earning. Switching to a fee-free account could save you hundreds per year. 

Common bank fees worth watching for include: 

• Monthly maintenance fees ($5 to $20 per month).
• Out-of-network ATM fees (around $5 per transaction, according to Bankrate research).
• Overdraft fees (around $25 to $30 per occurrence, according to Bankrate research).
• Paper statement fees ($1 to $5 per statement).
• Wire transfer fees ($15 to $50 per transfer).

Many online banks and some credit unions offer completely fee-free checking accounts with no minimum balance requirements. Bankrate’s list of best checking accounts can help you find options that won’t nickel-and-dime you with fees.

3. Wider branch availability and ATM access

If in-person banking is important to you, consider whether your current bank provides the branch access you need. Many consumers prefer the sense of personal support that comes with visiting a teller to make transactions or ask questions.

Larger national institutions like Chase, Bank of America, and Wells Fargo offer extensive branch networks across the country, while regional banks may provide better coverage in specific areas.

However, if you frequently pay out-of-network ATM fees, consider finding a bank that offers:

• A larger ATM network that better aligns with your travel patterns.
• Membership in surcharge-free ATM networks like Allpoint or MoneyPass.
• Reimbursement of other banks’ ATM fees.

A potential downside of choosing a bank with a large branch footprint is that many such institutions tend to pay lower APYs. Consider the hybrid approach: maintain a checking account at a bank with convenient branches while keeping your savings at a higher-yielding online bank.

4. Better digital experience

Not all banking apps and websites are created equal, as some provide a more seamless, user-friendly experience than others. If digital banking is important to you, research what different banks have to offer on the digital front.

Beyond the basics of checking balances, paying bills, and transferring money, today’s best banking apps include features such as:

• Zelle or similar services for instant peer-to-peer payments.
• Card security controls to lock/unlock your debit card instantly.
• Automated spending categorization for budgeting.
• Credit monitoring services.
• Early direct deposit access.

If perks like these aren’t included in your current bank’s app or website, it’s not hard to find a bank that does offer them. Locate a bank’s app on Google Play or Apple’s App Store to see screen shots of what the app looks like as well as user-generated ratings.

5. Sign-up bonuses

Beyond better rates, switching banks can put cash in your pocket up front. Banks and credit unions sometimes pay bonuses of $200, $300 or more to attract new checking and savings customers — and some offers run into the thousands of dollars for larger deposits. Bankrate tracks the best bank account bonuses and promotions available each month to help you find out if there’s an offer that makes sense for your wallet.

Most bonuses require you to open a new account, then meet a requirement such as setting up direct deposit or maintaining a minimum balance for a set period, typically 60 to 90 days.

Before chasing a bonus, read the fine print: watch for monthly fees that could eat into your earnings, and remember that bank bonuses are taxable — your bank will typically report them on a 1099-INT if the bonus tops $10. Do the math to make sure the bonus is actually worth more than what you’d earn or lose by moving your money in the first place.

Additional perks worth considering

If you’re in the market for a new bank, there are some additional perks to look for.

• Stellar customer service: Customer service-related perks at banks may include extended phone support hours and live online chat with a representative.
• Extended branch hours: If you work a nine-to-five, you may appreciate a bank with branches that are open outside of normal hours, such as on weeknights or weekends.
• Swag: While this is no longer often the case, some banks give out free items to new customers. These days, the most you’re likely to receive when opening an account in a branch is a mug or a magnet.

How to search for a new bank

Bankrate offers resources to help you find a bank that meets your specific needs. Start by identifying your banking priorities.

1. Determine what matters most: You should rank higher interest rates, lower fees, branch access and digital features by what’s most important to you.
2. Research options: Compare account rates and features using Bankrate’s guides on savings and checking accounts. You can also do independent research of your own, such as reading customer reviews or checking a bank’s mobile app ratings. 
3. Consider a hybrid approach: You don’t need to keep all your accounts at one bank. Many people maintain accounts at both online and traditional banks to maximize benefits.
4. Look into account switching services: Many banks offer switch kits to help transfer direct deposits and automatic payments.

Remember, switching banks doesn’t have to be an all-or-nothing proposition. You might decide it’s smarter to open a new high-yield savings account while keeping your checking account at your current bank, or to open a CD for longer-term savings while maintaining your existing accounts.

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