The last financial crises has increased the customer awareness and nowadays, customers are demanding more for less. In an era of rapid technological development, increased customer awareness and change in customers’ preferences, some banks see an opportunity to increase their customer base. Banks are trying to utilize this trend of bank clients demanding more value for less money. Banks have increased the value of their bank switching offers, bonuses and rewards to make people open an account with them, and later on use some of bank’s products and services.
These bank switching offers or new checking account bonuses and rewards are affecting the decision of a potential client. While in the past bank switching offers entailed some small home appliances (for instance a toaster), nowadays these offers could be in the form of cash, cash back, removal of fees, lower interest rates, story credits, etc. Thus making the offers more interesting than ever. They are especially interesting because some of them give short-term value while other provide value for you in the long run.
Although these offers are interesting and valuable they can complicate your decision-making process when selecting your new bank on the basis of the offers, You should also pay attention to the things you should consider before switching banks. For this reason before making a decision and analyzing the offers you should define whether you are switching banks often or you will work with the new bank in the long run.
What to take into account when selecting bank switching offers?
As it was mentioned, before deciding on the best bank switching offer, you should be aware about your personal bank switching habits. Namely, you should know whether you are switching banks often or you have more stable behavior when it comes to your bank. Identifying your bank switching pattern will provide you with the information of whether to go for a short-term offer or long-term offer. Knowing the type of value you want will make your decision easier. This in a sense that you could immediately exclude some of the offers for switching bank accounts. But in order to be able to exclude some of the offers, you must primarily rank them. When preparing the list of bank offers, rank these offers in two categories: short-term offer and long-term offers. That way you will know which list to eliminate, and you will be left with the list that provides the highest value.
Let’s consider a short run value offer. The most common short-term value offer would be the cash offer. This is not to imply that the amount of cash offered is small. The idea is to point out that cash offer for switching account is a onetime offer. Consequently, after the cash is deposited to your account, the value is gone (especially after you spend it). That is why this offer is offering value in the short. In case you do not plan to change your bank anytime soon, then you do not have any additional benefits for selecting the specific bank.
On the other hand, offers with long-term value could be more beneficial to you. These offers will provide benefits during the entire time you are with the selected bank. Considered the effect if the offer includes a waiving of certain fees if you switch your current account. Some fees can be substantial on a yearly level. What about the effect from an offer for lower interest rates on loans or higher interest rates on saving accounts? What is the value of a cash back rewards, is it short-term or long-term value? The aforementioned examples offer much more value in the long run, although at first it seems that it is better to go for the cash bonus. If you are planning to stay with your bank for many years to come, then it is better to switch to a bank where the offer include benefits for: fees, interest rate, or cash back possibilities.
Imagine that you switch your current account and transfer all you saving with the new bank. One time cash offer will be interesting, but if you stay with the new bank for many years it might turn out to be a bad decision. For example, imagine you have $10,000.00 in your saving account. Now you should decide between two offers, a $100 cash offer or additional 0.5% interest on your savings. What will you choose if you plan to be with the new bank for couple of years? Most likely someone will go for the cash money. Very bad decision. Calculate the additional interest income you will receive if you have selected the interest rate on saving account bank switching offer. It turns out that at the end of the first year you would receive additional $50, and you plan to stay with your bank for couple of years. Imagine that each year you save additional $5,000.00 of your yearly income. Then the second year you will have $15,000.00 on your saving account. Thus, the second year you will take extra $75 in interest income. This is the reason that you should always select the offer that is offering the highest value in the long run. You could make similar calculation with the fees you are paying. If there is an offer that will remove some fees, how much money will you save in the long run? Considered the money you would save if you go for a cash back on purchases offer.
When selecting a bank switching offer, the first step is to decide how long you will be a client of the new bank. The second step involves categorization of available bank switching offers according to their short-term value or long-term value. If you plan to be a short period of time with your new bank, then you could go for the cash offer. But if you plan to stay longer period with your new bank then the cash is not an option. You should choose an offer that gives you most value in the long run (whether it will be a fee waiver, increase in interest rate on saving account, cash back on you purchases), don’t go for the cash immediately. Decide wisely before switching banks.