When to Switch Banks: 7 Signs It's Time
Loyalty doesn't pay interest. Here's how to know when your bank is costing you money—and how to make the switch painlessly.
7 Signs You Should Switch Banks
Your APY Is Below 3%
The best high-yield savings accounts currently pay 4%+ APY. If you're earning less than 3%—or heaven forbid, 0.01% at a traditional bank—you're leaving significant money on the table.
You're Paying Monthly Fees
Many traditional banks charge $5-25/month unless you maintain minimum balances. Online banks charge $0—period. Those fees add up to $60-300/year in pure waste.
Your Bank Cut Your Rate
If your bank dropped rates while competitors stayed high, they're betting you won't notice. Shop around—loyalty isn't rewarded in banking.
You Need Features They Don't Offer
Want savings buckets for goal organization? Extended FDIC coverage? Same-day transfers? If your bank lacks features you need, switch to one that has them.
Customer Service Is Frustrating
Long hold times, unhelpful responses, limited hours. If getting help feels like a punishment, you deserve better. Many online banks offer 24/7 support with minimal wait times.
You're Exceeding FDIC Limits
If you have $250K+ at one bank, you're uninsured above that limit. Consider accounts with extended FDIC coverage (Wealthfront offers $8M) or split across multiple banks.
Your Bank Is Being Acquired
Bank mergers often lead to rate cuts, fee increases, or service changes. If your bank is being acquired, evaluate the new terms before they take effect.
How to Switch Banks: Step by Step
Step 1: Open Your New Account First
Don't close your old account until the new one is fully functional. Open online, fund with a small transfer, verify everything works.
Step 2: List All Connected Services
Audit everything linked to your current account:
- Direct deposits (employer, Social Security, etc.)
- Automatic payments (utilities, subscriptions, loans)
- Linked external accounts (Venmo, PayPal, investment accounts)
Step 3: Update Direct Deposits
Switch your income sources to the new account. This usually requires providing new routing and account numbers to your employer or benefits provider.
Step 4: Move Automatic Payments
Update billing info for each auto-pay service. Do this after your first direct deposit hits the new account so you don't overdraw.
Step 5: Transfer Your Balance
Move the bulk of your savings via ACH transfer. Keep a small buffer in the old account for any stragglers.
Step 6: Wait and Watch
Keep the old account open for 2-3 months. Monitor for any missed automatic payments or deposits. Fix issues as they arise.
Step 7: Close the Old Account
Once you're confident everything is moved, close the old account. Request written confirmation of closure.
How Long Does Switching Take?
Plan for 2-4 weeks of active switching, plus 2-3 months of monitoring. The actual effort is a few hours spread over several weeks—not a big project.
When NOT to Switch
Switching isn't always worth it:
- Rate difference is tiny: 0.1% isn't worth the hassle
- You need branch access: If physical branches matter, online banks won't work
- You're about to apply for a loan: New accounts can affect credit checks; wait until approved
- Special relationship pricing: Some banks offer rate bonuses for total relationship balances
The Real Cost of Inaction
Switching feels like effort. But every month you delay, you're paying a "laziness tax."
Monthly Cost of Not Switching ($25,000 balance)
The Bottom Line
Banking inertia is expensive. If you're earning below-market rates, paying unnecessary fees, or lacking features you need—switch. The process takes a few hours of effort for hundreds of dollars in annual savings.
Your loyalty to your bank isn't reciprocated. They'd drop your rate tomorrow if they thought you wouldn't notice. Be strategic about where you keep your money.