How to Break Up With Your Bank

Guy Calaf / Bloomberg-Getty Images

Consumer fury may have some banks rethinking their new debit-card fees for now, but rest assured financial institutions are still devising new ways to part you from your money. And when they succeed, you might consider taking your banking business elsewhere. Unfortunately, switching banks is an administrative nightmare, particularly for people who bank and pay bills online. This is by design.

Banks sold the idea of banking online as a convenience for consumers. But make no mistake, the real point of this exercise was to improve the banks’ profit margins. The more business they could move out of the branches, the bigger the boost to the bottom line. It worked. Consumers who bank online save banks $167 per person per year, according to Javelin Strategy & Research.

But banks also understood that, done right, online banking could be a very sticky application—one that could make consumers incredibly reluctant to switch banks. Typical consumers have 40 to 50 payees entered for their accounts, says Javelin’s Mark Schwanhausser. However, even a very dedicated online-banking customer uses only eight to 10 a month. But the perception that you’d have to sit there for hours reentering all that information makes consumers reluctant to switch. Even worse, you have to contact all those billers who swipe money out of your account automatically. “The worst thing you have to do as a consumer is call customer service,” says Schwanhausser.

The result: despite widespread disgruntlement with the banking industry, just 7 percent of consumers switched banks between March 2010 and March of this year. Analysts believe sneaky new fees could cause a spike in that number, but perhaps not as much as they think.

Done right, switching banks need not be all that bad. And many banks will now give you a “switch kit,” which is essentially a collection of generic forms you can fill out, sign, affix with a blank check, and submit to your employer and others who deposit money directly into your account, as well as billers who take payments out. Or, for $14.95, offers a little more in the way of handholding. It doesn’t do the work for you, but it will show you the way.

How do you choose a new bank? Credit unions and smaller banks are less likely to impose the debit-card fees you’re running from. Cancel recurring payments from your old bank and re-schedule them through your new bank, making sure you have enough money in the new account to cover those expenses. Switch the debit payments over to the card at your new bank. Then deal with automatic payments. Finally, leave both accounts open with enough money to cover any lagging payments until you’re certain that everything emanating from your old bank is clear.