According to a 2011 survey by FirstOntario Credit Union, the average Canadian has been with the same bank for more than 15 years. And yet, 40 percent of these customers admit that they're regularly disappointed with the services and fees associated with their chosen financial institution.
Banks are an integral part of the money management process. It pays to pick an institution that matches your banking needs and long-term financial goals. If your bank is bogging you down with fees or is incapable of accommodating your borrowing requirements, it might be time to cut the ties and move on to a better match.
Of course, it's worth noting that change for change's sake in banking is a bad decision. Switching banks can be time-consuming and potentially costly in fees, though there are always exceptions. If you're willing to research your options and ask the right questions, switching banks could turn out to be a solid long-term investment.
Reasons to consider a switch
Banking fees - and the lack of understanding behind these charges - is often the main motivator for making a bank switch. However, there are a handful of other reasons why Canadians tend to reconsider their current financial provider. These include:
- Customer service
If you aren't getting the service you expected from your bank, it might be time to consider jumping ship. In the banking world, quality customer service includes both in-person and online convenience. If you feel that your current bank doesn't respect you (whether they're putting holds on deposits or changing policies without proper notification), start looking for a better solution.
- Life circumstances
A change in your relationship status or location might make it difficult to maintain your current banking arrangement. Choosing to bank at the same institution as your spouse will make transferring funds easier and more affordable. If you're about to move to a different city, it's worth researching banking locations in your new neighbourhood. Sometimes branches of a bank that are popular in one city can be scarce in another.
Retail banking is a lucrative industry. Consider the fees you're paying in order to access your money. Whether you're paying to withdraw cash from another institute's ATM or ordering a new book of cheques, fees can eat away at your savings and disposable income - especially if you don’t think to ask about alternatives. As such, it's not surprising that more and more Canadians are looking to switch to low or no-fee banking partners, like PC Financial, ING, and local credit unions in order to avoid increased fees.
Before you make the jump from one institution to another (and incur the fees that may come along with this change), take a good look at your current account settings. If you're happy with the service and accessibility of your current institution, it might make more sense to switch to a different account type rather than switch banks entirely.
If you're looking for some objective advice concerning account selection, check out the following tip sheets from the Financial Consumer Agency of Canada: Choosing the Right Chequing Account & Bank Package and Choosing the Right Savings Account.
Before you make the switch
Moving money from one bank to another can cause a slew of problems if you're not careful. Before you close your account and transfer your funds, consider the following:
- Have you cancelled any automatic payments from your original account? How much will this cost you to do? Remember, the longer you've had your current account, the more accounts and automatic payments you're likely to have linked.
- Will opening a new account require a hard credit pull (a hard credit pull stays on your credit record and can impact your credit score by five or six points)? It's important to note that this could hinder your ability to secure a reasonable mortgage or car loan in the months following your switch.
- Is the interest rate really worth it? If you're moving your account to chase a promotional interest rate, remember that you'll actually be losing interest in the few days it takes to move your money from one bank to another. Make sure to determine whether the new interest rate is actually high enough to be worth the trouble of moving.
Switch with ease
Ready to call it quits with your current bank? Here are some tips to help make the move as easy as possible:
- Do your research and select a bank that best suits your needs.
- Open and fund the account immediately. If possible, try and fund the account with more than the minimum account balance to avoid any immediate fees.
- Switch direct deposits and automatic payments. This will begin the process of turning your new account into your primary account. You should also update any chequing account information for linked online accounts, such as credit cards or money transfer services (like PayPal, for example).
- Don't close your old account until any cheques and other payments have been cleared. Closing your account too soon could result in bounced cheques and additional charges. It might be worth it to leave the account active for an extra month after you think you've switched everything over, just to be sure.
- If you have a safe deposit box at the old bank, empty it and move the contents to a box at your new bank.
- Once all of your cheques have cleared and you're sure the old account is no longer necessary, contact your bank and close it out entirely. Make sure there's some money left in the account, as there will likely be a closing fee. The bank will cut you a cheque for the remaining balance.
Breaking up is hard to do
If you decide to switch banks, make sure you ask questions first and act second. If you're moving to avoid fees, grab a calculator and start crunching the numbers. Furthermore, it's worth noting that paying less often means that you'll be sacrificing personalized service.
Indeed, breaking up is hard to do. As such, it's important that you consider all of your options before you kick your current bank to the curb for good.
GoldenGirlFinance.com is a free personal finance and education site for women.
Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances.