The subject of switching banks is something that every one of us is planning to do at some point. Whether we will do it or not depends on different factors (personal or external factor, since, there are switching barriers that could force us to stay with the current bank). Regardless of the barriers, we should try to answer the question – Why switch banks? What are the reasons that could lead toward the desire or plans to change your current bank? Reasons could be found in the changes in our current life situation, dissatisfaction with our bank, competitors’ products and services, and/or follow the crowd mentality (desire).
Why switch banks? Answer:
Life situation – one category of reasons that could lead toward the need for switching banks is the category of life situation. More precisely, changes in your life situation. There are three basic changes that could occur in your life.
- Changing the place of residence – is a common reason for switching banks for many people. There is nothing wrong with this being the reason for switching banks. But if you relocate often, then maybe you should choose to switch to a bank with widespread branch network, or a big bank having offices in different countries and cities.
- Changes in marital status – is a reason that speaks for itself. Depending on your marital status you are looking for bank accordingly. Meaning that you would be looking for products offering joint accounts or you would like to close your joint accounts and open a new (separate) personal account.
- Changes in jobs or job status – starting a new job or losing your current job could also be a reason for switching banks. Again, you are adapting your banking activities in accordance to your current living situation.
Dissatisfied with their bank – another category of reasons that could augment your desire to change your bank is related directly to your present bank. Stated differently, you might want to change your bank, because of some general dissatisfaction with the bank or some of its products and services. Most common reasons in this category are:
- Fees – they should not be neglected in your banking activities. Thus, recognizing the importance of bank fees, people might change banks because of increase in fee level or introduction of new fees. On monthly, and especially, yearly level, fees could add up to a substantial amount, and if you are using multiple products, they can be even higher. Thus, fees can be pointed out as a separate reason that could led toward the need for switching your account (and all other products you are using) to another bank. Always be familiar with the fees you are paying for your bank products. Make periodical control for possible changes in the fees you are charged with.
- Hidden fees – this is closely related with the above reason that could stimulate you to switch banks. While, the above reason is taking into account the direct fees that you could be charged with, people also want to change banks because they are annoyed by the existence of hidden fees. This is in a sense that, the bank did not inform you about all fees that you are going to get charged with, or you are charged with additional fees for performing some activity with your bank.
- Inconvenient location – for whatever reason you have selected the specific bank, but you realize that the location of your bank is becoming inconvenient for you. Thus you want to switch to a bank that has a location in accordance to your needs. The location could be perceived in terms of the ATM network, or branch network, or even online availability.
- Decrease in interest rates on savings – initially you might be attracted by the banks’ interest rate, offered on saving products. What will you do if this value is diminished? What will you do if the bank lowers the interest rate paid on your savings? For many, the answer is simple, shop around for higher interest rates and switch to the banks that will offer highest value. Although in the short run this might seem as a negligible reason to switch banks, in the long run you could be losing significant interest income, especially if you take into consideration the compounding effect.
- Increase in interest rates on mortgage – this is the opposite of the previous. While the previous reason is taking into consideration a possible decrease in interest income, this is dealing with the possibility for increase in your installment. Sudden increase in the interest rate (or APR) you pay on your mortgage or other long term loan, could hurt your financial health in the future. Thus, make sure that you keep yourself informed about the level of interest rates, especially if you have a mortgage with adjustable rate. Here you should consider two things before deciding to change your bank on the basis of this reason. First, you should examine whether there is a general trend in interest rate increase, due to changes of economic situation. Second, confirm or reject the first by analyzing whether the increase is specific to your bank only or other banks are doing it as well.
- Complicated procedures and high level of bureaucracy – while all banks require the same basic documents for opening an account or applying for loan, there could be difference between banks in the additional documents or procedures they have. You should know that, each bank has its own internal procedures and policy when it comes to different products and services. There is a certain level of unified procedures in accordance to the legal framework, but, there are also banks specific procedures. This means, that some banks may have more complicated procedures than others. Because we all want to make our lives easier, we are trying to avoid any time consuming procedures and bureaucracy. Thus, people do change to another bank instead of dealing with high level of bureaucracy and complicated procedures.
Competitors’ products and services – the third category that could provide answer to the question – Why switch banks, is taking into consideration the competition. Namely, for one reason or another, the competitors have better products and services. Thus, abandoning your current banks, and choosing a competitors’ bank could provide benefits for your financial health.
- Better products and services with other banks – meaning that you are planning to switch your bank because its competitors are offering more attractive products. The attractiveness of the products could be numerous. For instance, other banks may offer lower APR on loans or lower fees. They might have faster or easier loan application process. You might find that other banks have better customer service, or better ATM or branch network. In addition, maybe you want to conduct your financial activities online, thus you could switch to a technologically advanced bank.
- Promotional offers – as funny it may seems, using the benefits from promotional offers made by competitors could also be a reason for some people to switch banks. It may be funny to switch banks solely to grasp a cash bonus. But if you have higher value after switching, then people could do the switch. Be careful when switching banks on the basis of promotional offers. You need to understand the value of these promotional offers, and their impact on your financial health.
Follow the crowd – could be also explained as a word of mouth reason for changing your bank. This is in a sense that some other bank has been recommended to you by a friend or relative. Your desire to switch to a bank suggested by someone close to you, is driven by their experience they have had with the new bank. In addition, your business partner could recommend you a bank where you could switch in order to ease the process of doing business. If this is the reason you are considering to change your bank, and open an account with other bank, then think twice. Don’t rush into things just to follow the crowd. You should evaluate the services and products of the recommended bank, in terms of their fit for you financial habits. Gather information about all relevant services and products you are using, and might be using in the future, and make comparison with the products and services offered to you by your current bank.
Think for a moment – Why switch banks? Do you know the reason that caused you to switch banks, have you ever thought to change your current bank? There are different reasons that could lead to the desire to switch to another bank. Whether you will do the switch is an entirely different issue. But, if you could find a better terms and could have high benefits if you switch to another bank, then you should do it. You can read an interesting report related to the reason for switching banks.