Why It Might Be Time to Leave Your Bank – and 3 Steps to Replace It

If your bank raised its fees tomorrow – and it seems to be happening more and more – would you ditch ’em? Most of us would, according to the National Foundation for Credit Counseling.

For their latest survey, they asked 2,200 people what they would do if their bank raised its checking account fees. The results show that…

• 51 percent would shop for another bank.
• 16 percent would complain to their bank.
• 16 percent admitted they’d probably never notice.
• 11 percent would grin and bear it.
• 6 percent would close their bank account and start using a pre-paid debit card.

Based on another recent study by Harris [PDF], those of us who do switch banks will probably pick a small, regional one instead of a big, national one.

“When it comes to banking and investment brands, consumers seem to be leaning more toward local brands,” says Jeni Lee Chapman, a vice president for Harris Interactive. “The feeling that larger financial companies let consumers down continues to weigh heavy on those brands. They will have to work hard to regain consumer trust.”

In fact, when Harris asked 25,000 people to rank retail banks – based on qualities like commitment, consumer connection, trust, and fair play – none of the big names made the top five. The Brand of the Year award went to BBVA Compass Bank, which earned a score of 62.3 out of 70. The 10 best-rated banks were:

1. BBVA Compass Bank: 62.3 (out of 70)
2. Huntington National Bank: 57.1
3. TD Bank: 56
4. Fifth Third Bank: 55.8
5. Bank of New York Mellon: 54.5
6. PNC Bank: 53.5
7. Chase Bank: 53.4
8. Wells Fargo Bank: 52.9
9. M&T Bank: 52.3
10. HSBC Financial Services: 52.1

If you’re considering leaving your bank but aren’t sure where to start, here’s a three-step plan to moving on…

1. Find your new bank

Small local banks will probably offer better deals than the monster ones. Or better yet, don’t use a bank at all. Use a credit union instead.

Credit unions are nonprofit and community-based, which translates into as close to the good old days as you’re likely to find. Compared to giant banks, most credit unions pay higher interest on savings and charge less for loans. Their fees and interest rates on credit cards are often lower too – and many still offer free checking.

If you’re worried about convenience, don’t be. If the credit union you pick is a member of a shared branch network, you can access it at any other credit union, even ones in Europe. In fact, you might even be able to access your account from full-service kiosks at the nearest 7-11.

If you’re not eligible for a credit union through your job, just use Credit Union National Association’s credit union locator to get a list of the nearest credit unions. Look for “community” as the type: That means you’re probably eligible to join by virtue of where you live as opposed to belonging to some profession or group.

Then compare their rates and fees to those you’re paying now. Like what you see? Then find out if they’re a member of a shared branch network by going to CUServiceCenter.com. If they are, that means you can go to any other shared branch credit union or ATM in the world to conduct business just like you would at your own. (Imagine banks doing that?)

2. Ease away from your old bank

Ask your new bank or credit union if they offer a “switch kit.” That’s just a collection of the paperwork you’ll need (which might be online) to re-direct your direct deposit and inform whoever is automatically taking money out of your old account to start taking it from your new one.

3. Don’t just cash out and close down

OK, you’ve opened a new, better account and filled out the forms to automatically switch all the stuff over. Ready to close your old account? Not quite yet. Leave the old account open for a while just to make sure all your checks have cleared and all your automatic deposits and withdrawals have switched. Go online daily for a couple of weeks and check both accounts to make sure everything’s kosher.