How to know when it's time to switch banks
Woman at an ATM

Every bank isn’t created equally. While they mostly offer the same services and functions, every customer’s experience will differ depending on the financial institution. It may sound surprising, but most people stick with the bank they’ve been using since they were a child. There are many other banking options out there, and it’s up to you as a consumer to consider your options.

Admittedly, you shouldn’t switch banks just for the sake of it. Instead, you should look for the signs when life tells you it’s time to make a change. Here’s when you should consider switching banks.

You’re tired of paying a monthly fee 

Unless you’re a student or senior, traditional banks will usually charge you a monthly fee of $5 to $35 to have a chequing account. Paying someone to keep your money sounds odd when you think about it.

While it’s true that many banks will waive or give you a discount on the monthly fee, it usually comes with conditions. For example, you might be required to maintain a minimum balance. Alternatively, your bank may require you to have multiple services with them. 

If you’re able to reach those thresholds and get those fees waived, that’s great. However, those who have cash flow problems may struggle with the idea of having an account that has monthly fees. In this situation, you may be better off switching to a digital bank that offers no fees or minimum balance requirements. 

Your money isn’t working for you 

The other concern many consumers have with traditional banks is the lack of interest that savings accounts come with. Even though interest rates have risen recently, most banks have been slow to increase their rates. Although some have offered higher rates, they’re typically for a limited time only. Once that promotional period ends, you’ll be back to earning a low interest rate. 

When it comes to digital banks, they typically offer a respectable amount of interest. They’re able to offer higher rates since they have no physical stores. Since they have lower overhead costs, they can pass on that savings to consumers through higher interest rates.

You have limited online options

While digital banks are famous for their no-fee accounts and higher interest accounts, they do have their limits. Most of them only offer basic chequing and savings accounts. If you need access to financial advice, a credit card, investment products, or a personal loan, you may need to look at another financial institution to meet your needs.

Note that it’s possible to get credit cards or a mortgage from a financial institution that you don’t do your day-to-day banking with, but some people prefer to keep things consolidated. You’d just have to decide if making a switch is worth it.

You’ve had a life event

Another reason to switch bank accounts is when you go through a significant life event. Let’s say you’ve recently become engaged or have gotten married. If you want to merge your finances but you and your spouse use different banks, it may make sense to consolidate with a single bank. Another situation where a change in banks might be necessary is when you move. While traditional banks have many locations, there might not be a branch near your new home. Travelling to get your daily banking done might be a pain, so switching banks would solve that problem.

There’s a good promotion

Most banks know that people don’t switch financial institutions regularly. To get you to consider a change, they’ll offer you strong incentives such as a free tablet or cash rewards. These promotions can be worth hundreds of dollars, so it’s a pretty good reason to consider a switch.

That said, to qualify for these promotions, you’ll usually need to set up various services with your new bank. For example, they’ll want you to enroll in direct deposit, apply for multiple products, and possibly maintain a minimum balance. They do this hoping you won’t want to go through the hassle of switching things later. Of course, you could take advantage of these promotions by switching banks whenever there’s a new offer available.

You’re not happy with the customer service 

One benefit that traditional banks can offer is customer service. While employee turnaround is bound to happen, you should feel like a customer, instead of just a number. If you find that customer service has been lacking as of late, it may be time to switch banks.

Look for things such as how responsive your investment advisor is. You’ll also want to consider wait times in branches and over the phone. If the online banking experience is lacking, then you may want to consider other options.

There’s no guarantee that a different bank will be any better, but it takes just one bad experience to convince people to switch.

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. As a completely self-taught, do-it-yourself investor with no formal training, he makes money easy to understand for all Canadians. His specialties include personal finance, budget travel, millennial money, credit cards, and trending destinations.

Barry Choi is a paid spokesperson of Sonnet Insurance.
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