Reasons to switch banks: Guide to better banking
Banks are always trying to entice people to switch to their institution. They’ll offer cash rewards to attract you. They’ll promise to treat you like a valued customer—someone they believe in and support, unlike those other banks.
Banks and credit unions do what they can to attract customers. People often switch banks to find one that aligns with their values and community commitment. If you’ve ever switched banks, you know it isn’t an easy process. Even after just a few months of banking, you likely have your paycheck directly deposited and numerous automatic withdrawals set up from your checking account.
Still, sometimes there are reasons to change banks, and some sources suggest it’s happening quite frequently. With so many banking options available, consumers have the opportunity to compare and select the best fit for their needs. According to RFI Global, a market research company, one in four Americans are currently considering switching banks—a 10-year high.
So, if you’re thinking about switching banks but are still on the fence, here are some compelling reasons to help you decide—whether to make the move or stay put with confidence.
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You’re going to save money by switching banks
That’s a good, if obvious, reason to switch banks. RFI Global found that people often have many reasons for changing banks, including frustration when a local branch closes—even though online banking is popular, some customers still value face-to-face interactions. However, one of the primary drivers prompting customers to leave their bank is the expectation of saving money. Lower fees are a significant reason to switch banks, as choosing an institution with reduced fees can provide better overall value and improved service.
For instance, overdraft fees could really be costing you. Most banks charge a fee for overdrafting your checking or savings account, and these fees tend to be high. Thirty-five dollars for an overdraft fee is typical, but a lot of banks charge less or even no fee if your account goes into the negative (you probably won’t be able to do any banking until the money is paid back, but that’s often the case when you go into the negative and are hit with a fee). Lower fees and higher interest rates are common reasons people consider when comparing bank accounts.
In 2024, the Consumer Financial Protection Bureau voted to cap overdraft fees to $5, but Congress overturned this measure in 2025 before it could take effect. Despite this, many banks have proactively reduced their fees or offer grace periods, allowing customers some time to deposit funds before overdraft charges apply. So, if you’re overwhelmed by overdraft fees and hoping to find a bank with more consumer-friendly policies, there’s a good chance such options are available.
You’re hoping to grow your money by bank switching
The whole point of a bank isn’t simply to have a place to put your money, but to manage it, and a lot of people would like to grow their stash of cash. So you may feel like it’s time to find a bank that has a high-yield interest savings account, or you may be interested in a checking account that offers interest.
Fair warning, if you’re looking for an interest-earning checking account. You usually need to carry a serious balance, like $10,000, before your bank will allow you to earn interest, and you’ll want to pay attention to fees, like a monthly maintenance fee. Many banks also require a minimum opening deposit to establish a new account, and this requirement can impact your ability to start earning interest right away. If the fees are more than what you’re going to earn in interest, it won’t be worth it. In other words, it can be hard to locate a good checking account that earns interest. But a savings account that earns a reasonable amount of interest? Those can definitely be found, and often without paying monthly maintenance fees.
You also may want to work with a bank that offers tools to help you grow your money through investments, where you can trade stocks, bonds and mutual funds. So if you feel that a different bank offers better investment opportunities, that is another excellent reason to switch banks.
Compare savings account rates
You’d like to take advantage of a cash bonus for switching banks
To switch banks, you should first open your new account before closing your old one.
This is generally not a great reason to switch to a new bank. Even the bankers at a bank offering a cash bonus would probably tell you that, or at least they would if you hooked them up to a lie detector test or got them to loosen up by plying them with a few drinks.
If you’re searching for a new bank, and you find, for instance, two that you like equally, but one of them is offering you $500 simply for joining them, then, of course, take the $500 and, if you want, roll around in cash and laugh manically. It may be the one time you feel like you’re robbing a bank legally.
But switching banks is a time-intensive challenge. You have to alert your employer and fill out a new direct deposit form (or several employers, if you work for multiple companies). After opening your new account, it’s important to update your direct deposit information with your employer and any other income sources to ensure your funds are deposited into your new account. You have to switch all of your automatic withdrawals with streaming services or any companies that bill you once a month. It’s a hassle, and if you’re only switching banks for the cash bonus, you may well end up deciding that it wasn’t worth it, especially if, long after that cash bonus has been spent, you realize you hate this new bank.
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You want better customer service
Understandable. Sure, some people might prefer to do all their banking online without ever speaking to a person, and if that’s you, customer service may not be a top priority. Maybe you’ve never stepped foot in a bank branch and don’t plan to.
But for others, personal interaction with bank staff is important. They value building relationships to navigate issues like overdraft fees or to seek advice on products such as certificates of deposit. Having a knowledgeable banker to talk to can make a big difference in managing finances and feeling supported.
According to a survey released earlier this year by the American Bankers Association, 93% of Americans say their bank’s customer service is excellent, very good, or at least good. So odds are, if you’re thinking of switching banks, customer service isn’t the reason. But if you’re rolling your eyes at that survey, and you think your bank or credit union probably has a branch located among fire and brimstone in the depths of the underworld, then, yeah, it’s time to find a new place to put your money.
You want a more convenient branch and ATM locations
Even in the 21st century, this is a very good reason to make the switch. Certainly, similar to customer service, lots of people couldn’t care less about branches and ATMs. If you do everything online, and you haven’t actually held any paper money for months or years, walking into a convenient brick-and-mortar bank or taking out money from an ATM may be the least of your worries.
But there are plenty of people who do use cash. Last year, YouGov, a market research company, produced a survey suggesting that 67% of people still use cash to pay for merchandise in stores. On the other hand, Federal Reserve Financial Services’ FedCash® Services produced a survey last year saying that consumers younger than age 55 used cash for just 12% of payments in 2023, compared to 22% for those age 55 and older.
Still, cash isn’t going anywhere (yet). If you prefer having money in your wallet, pay for most things in cash, or appreciate the human connection at your bank—like visiting the counter for assistance or snagging a free lollipop or pen—a more convenient bank branch or ATM location can make managing your money much easier.
Switching banks made simple: Next steps to keep in mind
Switching banks can be a rewarding decision, but it requires careful planning to ensure a smooth transition without disrupting your financial routine. Before closing your old account, it’s essential to open a new bank account and update your direct deposits and automatic payments to avoid missed transactions or late fees. Keep track of all recurring payments by reviewing your bank statements and bank records thoroughly. Maintaining both your old and new accounts open for a few weeks helps catch any overlooked automatic transactions and provides a safety net with enough money to cover unexpected charges. Additionally, be prepared to provide proper identification, meet eligibility requirements, and possibly make an initial deposit to activate your new account. By following these steps and staying organized, you can minimize the challenges often associated with switching bank accounts and enjoy the benefits of your new financial institution.
You’ll need identification
You will likely need to provide your driver’s license number as part of the identification process, or another government-issued form of identification, such as a passport. You will also likely need to produce your Social Security number or another number, like an individual taxpayer identification number or an alien registration number. Banks like to know who their customers are.
If you’re wondering how to switch business bank accounts, it’s pretty much the same deal, but you will likely need more documentation, proving that you are a business. For instance, you may need to furnish business formation documents or a business license. You may also need to provide your account number when opening or closing accounts, to verify your identity and facilitate the transfer of funds.
It takes time
You may need to switch banks in a hurry. For example, you might be relocating to a new part of the country without branches from your current bank, and want to establish banking relationships in your new community. Alternatively, more urgent situations like declaring bankruptcy may require you to leave your bank immediately—perhaps because you owe a significant amount on your credit card and are concerned the bank might withdraw funds directly from your checking account. Whatever your reasons, if you need to switch quickly, it’s best to start the process as early as possible and be prepared for it to take some time.
Not that opening a bank takes weeks or months; you may be able to open an account within minutes. However, some processes, such as eligibility checks and benefits activation, may take a few business days to complete. But you should allow two to four weeks, at least, before banking at your new bank feels normal.
It takes money
You may need money to switch bank accounts. While some banks allow you to open a new checking or savings account with no initial deposit, most require between $25 and $100 to activate your new account. Additionally, many banks have minimum balance requirements that you must meet to avoid fees or penalties. It’s important to factor in these costs when planning your switch to ensure a smooth transition.
Expect a few problems
It’s one thing if you have plenty of cash and can comfortably fund your new bank account while keeping a sufficient balance in your old account. In that case, you might experience a smooth transition without any issues. However, if you’re living paycheck to paycheck and switching banks, you are at greater risk of overlooking an automatic withdrawal or recurring payment, which could cause your account to go negative if you’re not carefully monitoring both accounts. To avoid missed transactions and potential disruptions, be diligent in tracking any outstanding checks and recurring payments during this period.
Additionally, don’t be surprised if, months later, you forget about an annual subscription or payment, and suddenly your favorite streaming service, magazine, or another company can’t withdraw payment because your old bank account is closed. To prevent this, it’s wise to keep a small balance in your old account until you’re certain all transactions—including outstanding checks and recurring payments—have fully cleared.
Finding the right new bank can be well worth the effort, but rushing the process without careful attention to these details may lead to unnecessary complications.
Frequently asked questions about switching banks
Opening new bank accounts typically involves soft credit inquiries that don’t impact your score. However, account application denials due to ChexSystems records could limit your options. ChexSystems is a financial company that many banks use to see what your banking record is like; it’s kind of like a credit report for banking customers. But simply switching banks shouldn’t affect your credit score.
The complete transition typically takes two to four weeks, though the initial account opening can be completed in minutes online or in a single branch visit. Direct deposit changes often require one to two pay cycles, and automatic payment transitions may take several billing cycles to fully implement.
Yes, you can switch your deposit accounts even if you have loans with your current institution. Your loan terms will remain unchanged, though you may lose relationship discounts. Some borrowers maintain minimal deposit accounts to preserve relationship benefits while moving their primary banking elsewhere.
Before switching banks, review your current bank statements to identify all automatic transactions like bill payments, automatic debits, and subscriptions. Update payment information with each provider and set up automatic payments from your new account at least two weeks before due dates. Many banks offer switch kits to help manage this process.
Link your checking and savings accounts for automatic transfers and overdraft protection. Use online and mobile banking to efficiently manage payments and transfers during the transition. Keep both accounts open temporarily to ensure a smooth switch of all automatic payments.
Evaluate potential banks based on your banking priorities: fee structures, interest rates, service accessibility, digital capabilities, and special programs. Consider both immediate benefits (switching bonuses) and long-term value (ongoing fee avoidance and better rates).
