Tuesday, December 16, 2008

When to fire your banker

I completely understand why some people stay in abusive banking relationships. They might get smacked around time and time again by punitive fees. Or they're credit card interest rates jump all over them just because of they were late on a payment to someone else. But still I understand that it's hard to leave. They've got you because they have all your stuff. They've got you set up with automatic bill payments and transfers. You've got books of costly checks and are entangled by loans. Your paycheck probably goes right to them as well. But that doesn't mean that you can't find a new financial institution.

When it's Time to Cut Loose
You've probably known for quite a while if your banking relationship isn't working. Maybe you've been ignoring those biting overdraft, ATM and hundreds of other ridiculous fees. But now it's personal. The way the economy is going you can't afford to ignore the fees. And don't think that they are going to improve. Bankers are a savvy bunch and they will find new ways to make money off your dollars. Credit card rules are likely to change in the next year, stepping on some current sneaky fees. That means more creative fees will be born. If you don't want to go with your gut then do the math:
  • Add up your fees over the past year. You can easily do this by reviewing your online account or bank statements.
  • While you shop for a new financial institution ask for a copy of their fee schedule. It might not be that easy to get. That's not because their hiding it, but because there are so many factors that determine your fees such as your aggregate savings balance and aggregate loan balance. The lower these numbers the more they'll stick you with fees.
  • Be persistent. Legally financial institutions must make this information available to existing and potential customers.

Choosing the One
Don't just compare fees. Take a look at services. Do they offer what you currently need? What about the future? What about access and convenience? How much of that do you need?

Making the Change
Most financial institutions will be more than happy to bring you on. Ask about "switch kits". These might include letters to utility companies and the like that explain that you've changed FIs. They may also include instructions on setting up direct deposit and electronic funds transfers.

Don't Forget
Don't forget to close the other account. It sounds silly, but many people will just open checking and savings accounts at a new FI without officially closing the other. They'll start working all their business with the new FI and let the other account waste away. The bad thing is that some FIs will charge you for low balance or dormant accounts. Technically you might end up owing them money if you ignore this step.

And don't forget to transfer all of your EFT payments to the new account. Combine this with forgetting to close the account and you could end up overdrafting the old account. Crazy, but I've seen it happen.

And Remember
  • It's your money. It's your money.
  • You have the right to shop around for the best FI.
  • You have the right to get the best return for your dollars.

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