Living in today’s society, it is difficult not to be associated with a bank. Everyone I know has a bank account. Nearly 66% of the transaction in NZ are done electronically through banks and financial institutions. Most employers will require you to have a bank account. Even if you were homeless and required support from the government means you will require a bank account (at least in New Zealand)
Heck, you can’t even buy certain things without a bank account. If you want to buy or sell a house, you’re going to need a bank account. Especially if you are going to get a mortgage, even if you will pay for a house in cash, you will still need a way of transferring that money on the settlement day. Try explaining to a lawyer that you want to pay for a house in cash.
Bank accounts and electronic transfers are so common that there is a whole industry of money laundering to get illegal cash transactions into the system.
Your first bank account
So if you’re like me, your first bank account will be one that was opened by your parent. Either this account is with the bank that your parent’s bank at, kind of like a religion, you inherit it from your parents. Or they give you the freedom to choose a bank you like.
I was given the choice of where to bank. And as a teenager, I choose a bank. I didn’t choose the bank using any logical analysis of which bank would suit me best. I just chose one. Heck banks even come to schools and help children open accounts under the pretence of teaching children about money. But they know that once you have an account, you’re unlikely to change.
That’s an easy way to get customers.
On average, people change banks only once every 16 years. And more than 25% of people have had the same bank account for more than 20 years. Try and think of other items or services that you have had for 20 years? I can’t think of many, although I am a millennial.
Speaking of millennials, we are the generation that will change banks more readily. Many will change just because the fees that they are being charged are too high. Followed that, the next reason to change is having a negative experience with the bank. And that is great that millennials will switch banks more often. This encourages the banks to provide better service and compete with each other for their customers.
15 years with the same bank
I have been with that same bank account since I was a teenager—a total of 15 years. Once I had my account with a certain bank, I didn’t ever think I needed to change. I opened more accounts with the bank, I got a credit card ( I can hear people screaming). Hell, I even once got a loan.
Yes- I am ashamed. I got a loan from the bank to get my car working again when I was a student. Don’t worry. I had the whole thing paid off within a month. That was the only loan, apart from my mortgage, that I have ever had. And I plan on keeping it that way.
I chose to stay with the same bank when I first got a mortgage. At the time, they were offering me a comparable rate as all the other banks. And the process was easier as they had all my income and expenses on record.
Why people don’t change banks
The most common reason people don’t change is that they think that all banks offer pretty standard services. They don’t think that there is a better offer anywhere else. Others think there is too much work involved in the whole process. Or they don’t even know how to start the actual transfer between banks. Some people often find it hard to change banks as they feel disloyal in the process. They might feel like they are letting their personal banker down.
None of these reasons are real reasons for sticking to a bank if they aren’t treating you right.
Do you need to stay loyal to your banks
Banks don’t feel loyal to you as a customer. There is no more value attached to you as a long-term customer or a recent customer. In fact, if you are a long-term customer, the bank has all the power, as they know that you are less likely to change since your life is now entwined with their services.
The longer you are with a bank, the harder, and probably more reluctant you are to change banks.
They are offering you a service
You have to remember that a bank is offering you a service in exchange for charging you fees. You are paying them for service! You don’t owe them anything, and they should be privileged to have your custom.
You don’t need to stay loyal to a bank. Do you think that they will stay loyal to you? That if makers turn they will be loyal and won’t foreclose on your house. Banks deal with so many people that you are a number to them. Remember that customer number you are given. That is how they see you, as a number in their system, not a complex person.
Why would you need to change banks?
My theory, which based on my own experience and that of friends and family, is that people change bank either because they have become furious at poor service, or because they are chasing a better mortgage rate, or their current bank doesn’t understand a business they want to start and won’t lend money for that business, or because of a major life event like a marriage, or sadly divorce has occurred.
The truth
The truth is that changing banks today is easy. The whole process takes about two weeks. And depending on banks, they will assign you a personal banker whose sole job is to help make the process as streamlined and easy as possible. And since most banks run electronically, you probably will only need to go into a bank once to sign and open an account. Everything else can be done using email.
4 Things to consider if you are changing banks
If you are dissatisfied with your bank, or they are charging too many fees, and you are considering switching here are 4 things to remember.
You can have accounts at multiple banks
There is no reason why you can’t have accounts at multiple banks. You can have your checking account at one bank, and savings account at another. Your mortgage can even be with a third bank. There is no real limit- keep in mind the fees associated with different accounts. I personally choose the online accounts banks offer, which normally don’t have any fees associated with them- until you go in and make a teller process something for you.
You don’t have to close all your account immediately
You don’t need to open accounts at your new bank on the same day as you close all your old bank accounts. There is no reason why you can’t spend months with accounts at two banks before you completely close one of them down. This will give you time to allow payments and cheques (who uses cheques????) to process. Or any automatic payments to go through.
Read the fine print.
Some accounts may have fine print associated with them that may sting. Some account, especially mortgages on a fixed term, can have early closing fees associated with them. You should watch those so that you don’t get charged when changing banks.
Considering switch your savings account
Consider switching your savings account to one that earns the most interest. Or better yet, swap out your savings account for a long-term investment in index funds or some other investment. Since the interest offered by banks these days is very low. This will help you grow your passive income even faster.
So, have you ever gone through the process of changing banks? How was it? Any Tips? Please leave them in the comment; I would be very interested in reading them!
Stay tuned for a post about why I changed banks and how I found the process.
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