What to Consider Before Switching Bank Accounts

What to Consider Before Switching Bank Accounts

What to consider before switching bank accounts (1)

Today, consumers demand a lot more robust services from businesses of all types. I know it’s not only me, but sometimes I feel like I need to switch my bank accounts, and the reason oscillates between low interest rates and unsatisfactory customer service. It may also be that you have moved to a new city and your bank’s reach doesn’t cover the new area.

In any case, switching bank accounts becomes paramount. Regardless of whatever reason for switching bank accounts, there are a host of factors to put into consideration and in this article, we will delve into what to consider before switching bank accounts.

What is the relationship between you and your bank?

When you keep your money in the bank, you are lending them the amount, and they use this money to give out loans, make a spread on it and pay you interest for the amount kept in the account; however, this is subject to what period you hold the amount for.

Thus, if you transact daily, your interest earned may be so minute. Also, transaction costs like account maintenance, taxes and electronic levies are netted off whatever amount you have in the account.

Whilst people see bank accounts as a holding place, it is rather a business transaction between the customer and the bank, where you earn interest rates in net of fees.

Why do customers switch bank accounts?

  • When the interest rates are not competitive.
  • When service is unsatisfactory.
  • High transaction costs.
  • When the regulatory authorities do not license the bank.
  • Other personal reasons like “Halal Banking”.

What to consider before switching bank accounts.

Before making the move to switch your bank account, there are a handful of factors to consider.

consumers-intent-to-switch-bank-accounts
  1. Make sure the regulatory authorities license your new bank; In Nigeria, the Central Bank of Nigeria is the sole regulator of all commercial banks and other non-bank financial institutions.
  2. Make sure the NDIC insures the new bank: The Nigerian Deposit Insurance Corporation (NDIC) is the body in charge of making sure depositors’ funds up to a certain extent (capped at ₦500,000) are insured. When switching to a new bank, it is important to look out for this.
  3. Service rates and delivery: It is important to compare interest rates across banks to ensure you are getting the best deal on your deposits. Also, service costs will impact the net amount on your account thus, it is important to keep that in consideration.

Another important factor to consider is customer service delivery. To gauge this, you can scan through social media pages to check customer feedback. But to summarize, here are important checkpoints to consider before switching bank accounts.

FactorConsideration
Service RatesCompare interest rates across banks to ensure the best deal on deposits.
 Evaluate fees associated with maintaining the account, including monthly maintenance fees, overdraft fees, and ATM fees.
Customer ServiceAssess the responsiveness and helpfulness of customer service representatives by contacting them via phone or email.
 Read online reviews and testimonials from current and former customers to gauge overall satisfaction levels.
ConvenienceConsider the accessibility and convenience of bank branches and ATMs, especially if you frequently deposit or withdraw cash.
 Evaluate the ease of online banking platforms and mobile apps, including features such as bill pay, mobile check deposit, and account monitoring.
Account FeaturesCompare the additional features offered by different banks, such as rewards programs, cashback incentives, and financial planning tools.
 Assess the availability of specialized accounts, such as high-yield savings accounts or retirement savings options.
Financial StabilityResearch the financial stability and reputation of the bank, including its credit rating and history of regulatory compliance.
 Consider the size and longevity of the bank, as well as any recent mergers, acquisitions, or regulatory actions.
AccessibilityDetermine the availability of online and mobile banking services, including the ease of use and security features.
 Consider the availability of physical branches and ATMs, especially if you prefer in-person banking services or need to access cash frequently.
Cost-Benefit AnalysisConduct a thorough cost-benefit analysis, weighing the benefits of higher interest rates against any potential service fees or inconvenience.
 Consider the long-term implications of switching banks, including any potential impact on credit scores or existing financial relationships.

Things to Consider Before Switching Corporate Bank Accounts

For corporate account holders, you need to consider a lot more factors as your business operations demand a reliable banking service, relationship, and support.

Switching business bank accounts can be a significant decision, so it’s essential to carefully evaluate your options and choose a bank that aligns with your business’s needs, growth plans, and financial goals.

If you run a small business in Nigeria, look out for the banks that support small businesses with loans, overdrafts and better forex offers.

Account fees

Compare the monthly maintenance fees, transaction fees, and other charges across different banks. Look for accounts with low or no monthly fees, especially if your business has a low volume of transactions.

Interest rates

If you plan to maintain a significant balance in your accounts, look for banks that offer competitive interest rates on business checking and savings accounts. Higher interest rates can help your money grow faster.

Branch and ATM network

Evaluate the bank’s branch and ATM network coverage in areas where your business operates. Convenient access to branches and fee-free ATMs can be important for cash deposits and withdrawals.

Online banking and mobile app

In today’s digital age, having a user-friendly online banking platform and mobile app can streamline your banking operations, such as checking balances, transferring funds, and monitoring transactions.

Customer service

Consider the bank’s reputation for customer service and support. Look for banks that offer dedicated business banking advisors or relationship managers who can assist you with your specific needs.

Additional services

Evaluate the bank’s offerings for additional services that may be beneficial to your business, such as merchant services, payroll processing, or business loans and lines of credit.

Integration with accounting software

If you use accounting software for your business, check if the bank’s online banking platform integrates seamlessly with your software, streamlining your bookkeeping and reconciliation processes.

Minimum balance requirements

Some banks may require minimum balance thresholds to avoid fees or maintain certain account types. Ensure that the minimum balance requirements align with your business’s cash flow and account balance levels.

Introductory offers and promotions

While not a long-term consideration, some banks may offer attractive introductory offers or promotions for new business customers, such as bonus cash or waived fees for a certain period.

Existing relationships

If you already have personal accounts with a particular bank, explore if they offer any benefits or discounts for bundling your business accounts with your existing relationships.

Final thoughts?

There are many reasons why one would want to switch bank accounts, however, it is important to do proper research before moving to a new account. Check for sync regulatory authorities, and customer service delivery and most importantly, do a cost-benefit analysis to properly weigh your option.

No bank has it all, there will be pros and cons but make sure the pros always outweigh the cons.

FAQs

  • Why should I consider switching bank accounts?

Switching bank accounts can offer various benefits, such as higher interest rates, lower fees, better customer service, and access to additional features and benefits. It’s important to regularly evaluate your banking needs and explore options to ensure you’re getting the best value and service.

  • How do I know if it’s the right time to switch bank accounts?

You may consider switching bank accounts if you’re dissatisfied with your current bank’s services if you’re paying high fees, if you’re seeking better interest rates or additional features, or if your financial needs have changed. Conducting a thorough evaluation of your current banking situation and comparing it with available alternatives can help determine if it’s the right time to make a switch.

  • How do I switch bank accounts?

To switch bank accounts, start by researching and comparing available options based on your preferences and needs. Once you’ve selected a new bank, open a new account and transfer funds from your old account to the new one. Update any automatic payments or direct deposits with your new account information and close your old account once all transactions have been completed.

  • Will switching bank accounts affect my credit score?

Switching bank accounts typically does not directly affect your credit score, as banks do not report account openings or closings to credit bureaus. However, it’s essential to monitor your accounts closely during the transition period to avoid any overdrafts, missed payments, or other issues that could indirectly impact your credit score.

  • Are there any fees or penalties associated with switching bank accounts?

While some banks may charge fees for closing an account or maintaining a minimum balance, many banks offer incentives or promotions for new customers, such as waived fees or cash bonuses for opening a new account. Be sure to review the terms and conditions of any new account carefully to understand any potential fees or penalties associated with switching.

  • Can I switch bank accounts if I have outstanding loans or debts with my current bank?

Yes, you can switch bank accounts even if you have outstanding loans or debts with your current bank. However, you will still be responsible for repaying any existing loans or debts according to the terms of your agreement with the bank. Be sure to update your payment information with your new bank and continue making payments as required.

Sign up for the newsletter

If you want relevant updates occasionally, sign up for the private newsletter. Your email is never shared.

Home

Marketplace

Learn

My Items

Home

Marketplace

Learn

My Items

More