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Is It Time to Switch Banks? Consider the Pros and Cons

If you’ve recently relocated, moved within your city, or simply need services not provided by your current bank, it might be time to consider a change. While switching banks can offer numerous benefits, it’s essential to weigh the potential drawbacks as well.

Pro: Earn Higher Interest

Not all financial institutions offer interest-bearing checking accounts, but many provide savings accounts with competitive rates. The national average annual percentage yield (APY) on deposit accounts is around 0.37%, but some high-yield savings accounts offer over 4%. If your current rates are lower, switching banks could help you earn more on your savings.

Con: Researching Rates Can Be Time-Consuming

Finding a bank that offers high-yield savings accounts or interest-earning checking accounts can be time-consuming. The Federal Reserve has increased interest rates multiple times recently, making it challenging to stay updated with the best rates. Sticking with your current bank might save you time and effort.

Pro: Access New Digital Banking Tools and Features

A survey by Mobiquity in 2021 revealed that 40% of respondents would switch banks for better digital tools. Many consumers, especially millennials and Gen Z, prefer online or mobile banking. Larger banks and online-only institutions often provide the latest digital features, which might be a compelling reason to switch.

Con: Forgetting to Change Direct Deposits and Withdrawals

When switching banks, it’s easy to overlook updating direct deposits, withdrawals, and automatic payments. Ensure you update your banking information for all transactions to avoid missed payments or incorrect deposits. You might need to maintain both accounts temporarily to ensure a smooth transition.

Pro: Cash In on Incentives and Bonuses

Many banks and credit unions offer cash bonuses to attract new customers. These bonuses, often available for a limited time, can be quite appealing. However, you may need to meet specific requirements, such as setting up direct deposit or making a minimum deposit, to qualify.

Con: Potentially Incur New or Higher Fees

Bank fees, including overdraft charges, ATM fees, and maintenance fees, can add up. Before switching, review the fee structure of the new bank to ensure you won’t incur higher costs than your current bank.

Pro: Improve Your Customer Service Experience

If you’re dissatisfied with your current bank’s customer service, switching might improve your experience. Many banks, credit unions, and online banks offer better customer service and are eager to earn your business.

Con: You May Have to Build New Relationships

Switching banks means starting over and building new relationships with bank employees. Established relationships can offer benefits, such as faster loan processing. If relationship banking is important to you, this might be a disadvantage.

The Bottom Line

Switching banks can be a viable option if you’re seeking better rates, fewer fees, or new digital features. The most time-consuming aspects are choosing a new bank and updating your linked accounts. Fortunately, switching banks does not negatively impact your credit. Carefully consider all your options to make the best financial decision.

For any mortgage-related needs, feel free to call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your financial journey with confidence.

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