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Switching Banks? Proceed Witih Caution

Sherry Tingley -- The Occupy Wall Street proponents are advising unhappy Americas to switch their banks. But don't jump too quickly. Breaking up can be hard to do.

Since the call went out recently from people involved in the Occupy Wall Street movement and other efforts to rein in the country's big banks, thousands have shifted their funds into alternative financial managers, including credit unions, community banks, saving and loans and others. There is some indication that the big banks are paying attention to the unrest spreading through the country. Some have backed away from announced fee increases. Even so, the momentum for expressing disfavor with one's bank by marching to another is under way. The date set by the Occupy group is Nov. 5, but don't hurry just to meet that arbitrary date.

A spokesman for Institutional Risk Analytics reported that banks in more than 16,000 American zip codes -- more than half of those in the country have been subject to recent online searches. That could be bad news for the largest banks, but is it enough to spur real changes in how they treat customers? Time will tell. As of 2009, four banks -- Citigroup, JPMorganChase, Bank of America and Wells Fargo -- held 39 percent of all deposits in FDIC-insured banks, according to Reuters. The options for getting out of one of those monsters into something more user-friendly are many. American Bankers Association reports more than 8,000 other banks and 7,600 federally insured credit unions to choose among.

But move cautiously. In 2008 the Federal Reserve published a study that indicated that trying to leave one bank and go to another may be a mere exercise in "switching costs." The researchers found it was incredibly difficult for consumers to get reliable information about the costs charged by the new bank. They described a "bargains-then-rip-off strategy" in which the free toaster offered for enrolling is followed by an avalanche of previously unspecified fees. Often, the report says, the prospective bank will not even make information about fees available to new customers. The data is not listed on Web sites and comparison shopping is almost impossible. Some credit unions are providing "switch kits" to help in those considering a change, but in general the kits can do little more than identify differences in payments and deposits. In the end, switching banks means swimming through the red tape.

In some instances, credit unions charge fees that compare with those charged by the bigger banks. But they tend to have credit card rates that are lower -- one full percentage point lower on average. Their car loans carry lower interest, but one-year CD rates and mortgage rates tend to be higher than at banks. Community banks tout community ownership as one of their pluses. A familiar face across the counter counts, they say.

Regardless of the direction your own study takes you, reduce the potential trauma of a switch by following these tips from Consumer Action: Expect the switch to take some time. Initially, keep your original account open while setting up the new account, putting only as much into the new account as required to maintain it. If you have paperless banking, print or save statements and digital copies of canceled checks as PDFs or it may become difficult to access those documents after the fact. Order new checks (they're cheaper from outside sources than through the bank itself) deposit slips and ATM cards from the new institution being aware they make take some time to arrive.

Only when the new account is established should you transfer automatic or recurring payments from the old account. Don't overlap. Be sure all outstanding items are cleared before closing the old account. Keep your user names and passwords on hand to smooth any sticky spots. Review several months of statements from the old bank to be be certain you haven't missed anything such as utility or insurance payments that are authorized for automatic withdrawal bimonthly or quarterly. Be certain your old bank has your current contact information to facilitate any loose ends or slip-ups that occur in the transfer.

Sherry Tingley is a successful online marketer who helps others develop leadership skills and create opportunities for themselves. Visit her site at to order inexpensive personal or business checks online and save money. Prices are up to 50% off regular bank prices, and there are thousands of designs to choose from.

© 2012 Sherry Tingley

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