Tuesday, October 18, 2011

Think before switching banks

Protesters with the
Associated Press Protesters with the "Occupy Seattle" movement burn a Bank of America debit card as they protest in downtown Seattle.

Many consumers stay with their banks for the same reason couples remain in unhappy marriages: It's a hassle to leave.

Lately, though, new fees for debit cards and other services have galvanized bank customers. Like spouses who discover their partner has joined an online dating service, they've had it and they want out.

The Occupy Wall Street movement has picked up on the general discontent. Organizers have designated Nov. 5 as "Bank Transfer Day" and are encouraging customers to move their money into small banks or credit unions, which often have lower fees. The disgruntlement was triggered by Bank of America's announcement that it will charge debit card users a $5 monthly fee. SunTrust and Regions Financial have also added debit card fees, and Wells Fargo and JPMorgan Chase are testing them in some markets.

But switching bank accounts isn't easy, particularly if you have direct deposit, online bill payment, and a lot of checks floating around. Factors to consider before you file for divorce from your bank:

-There's no guarantee your new bank or credit union won't raise fees, too. The new fees charged by BofA and others were triggered by a new regulation that cut in half the fees financial institutions can charge retailers when customers use debit cards for purchases.

The regulation exempted banks and credit unions with assets of less than $10 billion. Still, trade groups representing those institutions opposed the rule, arguing that the carve-out wouldn't work. Those concerns haven't disappeared, says Camden Fine, CEO of the Independent Community Bankers of America. He adds, though, that community banks are usually reluctant to raise fees because they serve smaller markets and rely on relationships with customers to stay in business.

A Credit Union National Association survey in January found 91% said they expected to make some change in their rates, fees or services because of the legislation cutting debit card fees. Still, credit unions view raising fees as a last resort, and in light of the outcry against BofA's move, "Credit unions are doing all they can to hold the line on fees," says the CUNA's Mark Wolff.

- Bank-hopping can get expensive. Some banks and credit unions charge a fee for closing your account that typically kicks in within 90 days to six months after you open your account. This won't affect you if you close an account you've had for several years. But if you open an account with a new institution and get hit with new fees a few weeks later, you may have to pay to leave.

- You won't necessarily pay higher ATM fees if you join a small bank or credit union. Big banks have thousands of their own ATMs, which means you don't have to worry about out-of-network costs.

However, many credit unions and small banks belong to networks that offer thousands of surcharge-free ATMs. Some small banks and credit unions waive fees for using an out-of-network ATM. You may still be required to pay a fee to the bank that owns the ATM, but some institutions will reimburse you for that cost.

- You can save a lot of money if you don't need a branch. Some of the lowest-cost checking accounts are available from online-only banks, such as Ally Bank, ING Direct and Bank of Internet USA. Some also pay above-average interest on their checking accounts, offer rewards for using your debit card, and will reimburse you for the cost of using another bank's ATM.

The downside? These banks may not be a good choice for people who need to deposit a lot of checks. In most cases, you'll either have to mail in your check or pay for a wire transfer. Ally Bank recently launched a service that allows customers to deposit electronically with a scanner.

- You may not have to leave to avoid fees. Many banks will waive monthly checking account fees for customers who maintain a minimum balance, use direct deposit or pay their bills online. You can avoid debit card fees by using cash, a credit card or a check, although the last option won't win you a lot of love in the checkout line.

by Sandra Block USA Today Oct. 18, 2011 08:44 AM

Think before switching banks

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