How to choose and switch to a better bank for you

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How to choose and switch to a better bank for you
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Choosing the right bank can be tricky, especially if you aren’t quite sure what to look for, or maybe if you haven’t had to make any big purchases that involve loans — like a home or car. But there’s more to consider when picking a bank than just whether or not there’s a branch down the road from you.

There are several factors to take in to account when deciding which bank is best for you. Most Americans have a checking account with one of the four largest banks: Bank of America, Chase, Citibank and Wells Fargo. According to Consumer Reports, these ‘big banks’ hold about 40% of all U.S. commercial bank assets — and they’re convenient, with more than 17,000 branches and more than 80,000 ATMs that are fee-free. Plus, they offer easy-to-use online access and other digital platforms.

BUT, here’s the part you may not realize: all four ‘mega banks’ scored in the bottom fifth of a recent Consumer Reports survey, which rated more than 74,000 banks and credit unions. 

Read more: 11 fees you should never pay

Survey says: Bigger is NOT better

According to Consumer Reports, it’s not that customers of the big banks weren’t satisfied in general, but once they shopped around, they were able to find better banking alternatives at smaller banks — including some that only operate online. The survey found that consumers were also more satisfied with credit unions, particularly concerning customer service and fees.

How to choose a new bank

Don’t settle…

The good news is that if you aren’t 100% satisfied with your bank, choosing the best bank that fits your needs just got a lot easier! (And if you are satisfied with your bank, but haven’t shopped around, how do you know you’re 100% satisfied?)

If you have everything in one place — let’s say your checking account, savings account, car loan and home loan — then you may get some added benefits or fee discounts from your bank. But according to Consumer Reports, ‘when you buy a ‘product bundle’ at a bank which contains a number of services rolled into one offering, it’s hard to know if the fees you pay are lower than if you opted to get different services at different banks.’

There are so many low-cost and convenient options available these days, you don’t have to settle for one bank or one offer.

Comparison shop for each service

If you shop around for the best deal at different financial institutions, there’s a good chance you’ll save some money. According to the CR survey, 38% of people said they have a second bank or credit union they do business with, because they ‘were able to get better rates for some services and products at other institutions than their primary bank or credit union.’

Bottom line: You don’t need all your services from one banking institution. Do some research and find the best deal on each service you need — or may need in the future (like a mortgage or car loan).

Read more: Switching to a credit union can be your best move

What to look for to get the best service & lowest fees

Here are a few tips from Consumer Reports to help you get the best deals on all of your banking needs.

Checking & savings accounts

  • Look for a credit union that’s a member of a network, such as the CO-OP system of 30,000 fee-free ATMs and 5,000 shared branches. Find out which credit unions you’re eligible for at CUNA.org.
  • Make sure it offers online and mobile account access.
  • Check Consumer Reports’ list of the best rated credit unions to see if you’re eligible for membership.
  • If you don’t qualify for any on that list, go to MyCreditUnion.gov and use the ‘CU Locator’ tool to comparison shop different credit unions.

Read more: 9 places to never use a debit card

Certificates of deposit (CDs)

Auto loans

  • Your best bet is a credit union, as Consumer Reports says credit unions most often offer the lowest rates.
  • If you aren’t a member of one, find out which ones you’re eligible to join and then get prequalified for a loan before you start car shopping.

Read more: Should you take a longer car loan to lower your payments?

Credit cards and mortgages

  • Start by comparing credit cards and mortgages at online banks. If you only consider what’s available to you at the bank where you have a checking account, you’re limiting your options and probably missing out on a better deal.
  • Check out this guide to comparison shopping credit cards.
  • Credit unions are also a good option for mortgages. Here’s more information.

Read more: 15 ways to shop for the lowest mortgage rates

Brokerage services

Prepaid cards

Here’s how they work: You deposit money on account that can be used as if it were a credit card (but without consumer protections) or like an ATM card to withdraw money (but without the protections of an ATM card).

Pre-paid cards may boast a Visa or MasterCard logo—or an American Express logo, to a lesser extent—but they’re really just inferior facsimiles of the real deal. These cards are loved by millennials because you can’t spend more money than you have. So they’re a way to store money and pay for things without having a traditional bank account. But they typically fee you to death!  

  •  The most important thing with prepaid cards is to read the terms and conditions closely to know what you’re getting into.

  • Clark’s favorite prepaid cards give you the ability to use the card with no fees, along with offering at least some basic consumer protections. Those protections can include restoring your funds if your card is lost or stolen or that your money is safe if there is fraudulent activity on the card.

  • Consumer Reports suggests Bluebird, offered by Walmart and American Express, or Liquid, offered by Chase. Both were rated the best out of 23 prepaid cards, because of their low fees and terms.

Paper checks

  • If you still write paper checks, you don’t have to get them from your bank! Consumer Reports found great deals at Costco and Walmart.

How to switch to a new bank

Switching banks can get tricky depending on how many accounts, cards, automatic payments and other things you have set up. Here are a few steps to take to make the process as easy as possible.

1. Open a new checking account

If you’re switching your primary banking services to a new bank, credit union or online bank, first open a checking account to start the process of moving things over. Most banks will allow you to do this online, and if not, then it’s a pretty quick process in person at your local branch. Opening the new account may require an initial deposit of $50 or less.

2. Switch your paycheck direct deposit

This process may take your bank some time, so it’s better to do it as soon as you open the new account.

3. Stop automatic bill payments

If you use automatic bill pay for any of your monthly bills, make sure to stop those immediately. Just make a note of when each bill is due each month, if you’re worried about forgetting to pay without the automatic bill pay doing it for you. There are two ways to do this:

  • If you use ‘push’ payments, which are payments you schedule to be made on certain dates each month, then you should be able to cancel those through your online account.
  • If you use ‘pull’ payments, which authorizes the company to pull the money out of your account each money, then you may have to contact the company directly to get that canceled.

Important note: If you are using ‘pull’ payments that allow companies to access your bank account, that’s a bad idea. Consumer Reports suggests not setting those up again in the future, to ensure you are the only one who has control of your account.

Also, when it comes to monthly payments and bill pay, Clark suggests not turning off the paper statement option. If you have the bills sent to you in the mail each month, you will always have records of everything in case a mistake is ever made. 

4. Temporarily keep the old account open

Don’t close your old checking account until all payments and bills have been made — and have cleared your account.

Credit cards: If you open a new credit card and don’t use your old one anymore, do not close the account — that will ding your credit. Just let the account sit there after the balance is paid off.

5. Close the old account

Once all balances have been paid off, you can transfer the money from your old checking account to your new one, or get a check from the bank to deposit into your new account.

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Alex Thomas Sadler About the author: Alex Thomas Sadler
Alex Thomas Sadler is the Managing Editor of Clark.com and Clark Howard Digital Products. Alex is also the host of Common Cents, a new Clark.com series that makes money simple, so you can better understand and take control of your own financial life. Alex graduated from the University of Georgia with bachelor's degrees in ...Read more
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