Choose and switch to a better bank for you A step-by-step guide to cheaper & easier banking

Alex Thomas Sadler
Choose and switch to a better bank for you | A step-by-step guide to cheaper & easier banking

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Choosing the right bank can be tricky, especially if you aren’t quite sure what to look for and haven’t had to make any big purchases that involve big loans — like a mortgage or a car loan.

With so many options out there these days, it can be easy to just stick with the big mega bank you’ve been using for years. In fact, most Americans have a checking account with one of the four largest banks: Bank of America, JPMorgan Chase, Citi and Wells Fargo. According to Consumer Reports, these “big banks” hold about 40% of all U.S. commercial bank assets. They’re also convenient, with more than 17,000 branches and more than 80,000 ATMs – and most of them offer easy-to-use digital tools and resources.

But with all the various banking options available to you these days, there are several factors to take in to account when deciding which bank — or credit union — is best for you.

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Survey says: Bigger is NOT better

According to Consumer Reports data, all four “mega banks” scored in the bottom fifth of a recent survey, which rated more than 74,000 banks and credit unions.

Customers of the big banks weren’t necessarily unsatisfied, they just discovered that once they shopped around, they were able to find better banking alternatives at smaller banks — including some that only operate online. The survey also found that consumers were more satisfied with credit unions, particularly concerning customer service and fees.

How to choose a better bank for you

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 is now a lot easier than ever. And even if you do feel satisfied with your bank, it’s crucial that you shop around to make sure you’re getting the best bang for your buck.

If all of your finances are in one place — so let’s say your checking account, savings account, car loan and home loan are all with one bank — then you may get some added benefits or fee discounts for that. 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.

In fact, you can get specific services from as many banks as you want — which can often be the best way to get the best deal on each product or service. There’s no rule against having separate accounts at a bank, credit union and online bank — or a combination of two.

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How to shop for the best deal on each of your financial needs

If you shop around for the best deal at different financial institutions, there’s a good chance you’ll save some money. According to Consumer Reports, 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.”

Most people stick with the same old bank because they just don’t want to deal with the hassle of moving everything — but it can be a lot easier than you think.

Plus, online banks are now offering much higher rates on savings accounts — significantly higher than the current rates at traditional, bigger banks. So with that in mind, why not just move your savings to take advantage of the bigger return?

To give you some context, online bank ally recently increased the rates on its savings accounts to 1.20% — while the rate on a regular savings account at Bank of America currently sits at only 0.01%.

Bottom line: You aren’t tied to one bank no matter how long you’ve been doing business there. With so many options available, you will very likely find better deals if you start looking around. Do some research and find the best bang for your buck on each service you need — or may need in the future (like a mortgage or car loan).

RELATED: 7 ways to protect your money, even from your own bank

What to look for to get the best service, lowest costs

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

Checking & savings accounts

There are a few key factors to consider when choosing where to open a checking or savings account.

Here are just a few examples:

  • Fee-free checking
  • Few fees in general
  • No required minimum balance
  • High savings rate

Where to look:

Your best bet is going to be a credit union or online bank — especially considering America’s three largest banks (Chase, BoA & Wells Fargo) raked in nearly $6.5 billion last year in overdraft and ATM fees.

  • 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.
  • You can also go to MyCreditUnion.gov and use the ‘CU Locator’ tool to comparison shop different credit unions.
  • If mobile access is important to you, make sure that the institutions you’re considering offer online and mobile account access — plus whatever other tools and resources you may need.
  • Look at online banks — many of them offer the same products and services as traditional banks, but with fewer fees, lower costs and higher returns. Plus, many offer great apps, easy access to your accounts and overall user-friendly experiences.

RELATED: How to earn 100x more on your savings

Certificates of deposit (CDs)

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Auto loans

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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, so make sure to find out which ones you qualify for so you can compare rates and offers.

Finding the best deal also depends on your financial status and personal needs, which means a smaller/regional bank could end up being your best option — you just don’t know until you’ve shopped around. So make sure to consider all of your options before making a decision — that way you’ll know that you’re getting the best deal and rates.

RELATED: 15 ways to shop for the lowest mortgage rates

Brokerage services

Prepaid cards

Here’s how they work: You deposit money into an 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).

Prepaid cards may boast a Visa or MasterCard logo — but they’re really just inferior versions of the real deal.

Some people like the idea of not being able to spend more money than you have, but the problem with that way of thinking is that prepaid cards typically fee you to death — which is just a big waste of your hard-earned cash.

  •  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.

RELATED: How to choose the best prepaid card

Paper checks

  • If you still write paper checks, you don’t have to get them from your bank! You can find 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 may have set up through your current accounts. 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, but just make sure there’s no annual fee on the checking account.

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. Here’s a quick and easy step-by-step guide on how to get it set up through your new bank.

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 month, then you may have to contact the company directly to get that canceled.

Important note: If you are using automatic debit transactions that allow companies to access your checking or savings account, you need to cancel those immediately!

Here’s more on why automatic billing is a bad idea and better options to consider.

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.

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.

6. DO NOT close credit card accounts

If you open a new credit card and don’t use your old one anymore, do not close the account — that will damage your credit. Just let the account sit there after the balance is paid off. Here’s more on how credit cards impact your credit score.

More tips on how to choose & switch to the best bank for you!