Deal Hunter: When and how to switch banks

Correction: An earlier version of this article said that a customer’s current bank would handle notifying billers when a customer changes banks. It is the new bank that handles this notification.

October 14, 2011

The backlash that Bank of America faced last month when it announced it would start charging $5 monthly debit-card fee proves that we don’t like it when things stop being free. With new banks making big claims and wanting your business (read: money), you’re probably wondering if the grass really is greener — or at least cheaper — on the other side. To find out, we consulted Carol Kaplan, spokeswoman for the American Bankers Association, on the when, why and how of switching banks.

When should you consider switching banks? Major life changes sometimes trigger a bank switch, Kaplan says. “Examples would be a new job; major change in financial circumstances; marriage or divorce; buying or planning to buy a new car, home or other major purchase requiring a loan; relocation. . . . The only other reason to consider switching is if you are unhappy about a bank’s policies or service.”

What resources can consumers use to research banks before switching?BankRate.com is a good one. Also, MyBankTracker.com and DepositAccounts.com.”

What should you look for in a new bank? Think about these key questions, Kaplan advises. “How often do I need to make deposits and withdrawals? What locations are most convenient? Am I able to keep a large minimum balance or utilize direct deposit? Do I prefer to bank at a branch, online, at ATMs or by mobile device? How well do I manage my account in order to avoid overdrafts? Will I need to take out loans? Do I have savings or investment needs? Do I own a small business?”

What should you know before you switch? “Your old account needs to stay open until all of your checks or payments have cleared. . . . Plan for a 30- to 60-day transition period if you use auto bill-pay.”


Do new fees have you considering a change of banks? (Lisa Poole/AP)

How can you make the transition seamless? “Many banks offer online ‘switch kits,’ ” Kaplan says. Fill out a form online to transfer bills and direct deposits to the new bank and your new bank will handle notifying your billers. “This dramatically simplifies the process of switching banks for the consumer.”

Trying the new guys

We took an imaginary bank balance — $600 — and investigated checking accounts at three banks that are new to the Washington area. Here’s how they stack up:

Ally Bank

A “branch-free” bank, Ally (formerly GMAC) requires customers to do all their banking via Internet, phone or ATM. Only an interest checking account is available; the Web site’s interest-rate calculator predicted that our $600 average monthly minimum balance would yield $3 per year in interest at a 0.50 percent interest rate.

What you’ll love: Zero balance to open an account and no monthly minimum balance; no monthly maintenance fees and no ATM fees; free checks and postage-paid deposit envelopes; free online banking and bill pay.

What you won’t: $500 daily withdrawal limit; consumers accustomed to branch banking might be turned off by over-the-phone customer service.

Learn more

www.allybank.com

TD

TD Bank offers six types of checking accounts, including three that earn interest. Of the two basic checking options, one carries a $3.99 monthly maintenance fee in exchange for no monthly minimum balance; the other requires a $100 minimum balance to waive a $15 monthly maintenance fee. If we wanted to use our $600 to open an interest checking account, we’d pay a $25 monthly maintenance fee because the balance is less than $2,500.

What you’ll love: Dozens of TD ATMs and branch outposts in the Washington area; free 24/7 live customer service and automated coin counting in bank branches; no minimum amount required.

What you won’t: One account offers free checks, but just for the first order. To gain from an interest checking account, you’ll need to have a monthly balance of at least $2,500. Fees for non-TD ATMs.

Learn more

www.TD.com

Wells Fargo

Formerly Wachovia, Wells Fargo offers a basic checking account, as well as two interest-earning options. Basic checking requires a $100 minimum opening deposit and carries a $5 monthly maintenance fee (which is waived if you use direct deposit or keep a minimum daily balance of $1,500). For interest checking with our $600 balance, we chose the Complete Advantage package, which bundles a checking and savings account (requiring $200 to open both). Our balance would earn 0.05 percent annual percentage yield, which is about 30 cents a year.

What you’ll love: Free online banking and discounted checks; avoid the monthly maintenance fees with an automatic $75 monthly transfer from checking to savings. Dozens of area branches.

What you won’t: Fees of up to $2.50 for non-Wells Fargo ATMs; no free checks.

Learn more

www.wellsfargo.com

THE BOTTOM LINE

If you’re considering switching, first assess your personal financial needs. Use a Web site to compare banks in your area and determine which ones meet your requirements. Ask if your current bank offers a service to make the transition easier, and remember that you’ll need to keep your old account open for at least a month — maybe two — to avoid automatic bill-payment glitches.

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