If you’re much like me – and like many Canadians – you’ve signed up for a bank account many moons ago and simply let it do its thing. Statistics support this: a 2016 survey by Ratehub.ca found that 12 percent of millennials and 56 percent of boomer-aged Canadians have held on to the same account for at least twenty years.
Despite the trend, changing banks or bank accounts can and often should be a part of any plans you may have to reorganize or rebuild your finances. Modern conveniences have made it possible to sign up for new bank accounts with relative ease, but knowing which ones are right for your money takes a little more research.
In the 2017 edition of the same Ratehub survey, 40 per cent of Canadians surveyed believed that their bank didn’t offer the most competitive rates on any of the financial products or services they currently used. And yet, we remain relatively staunch loyalists to our financial service providers of choice. If you’re in a situation where getting the absolute most mileage from your money is key, there’s not a lot of downside to playing the field and shopping around for the lowest rates and fees – even keeping different accounts with different banks to optimize fee structures. Some banks offer incentives for opening new accounts – if you’re really dedicated and savvy, it may be possible to “surf” these perks for as long as you can, much like one might with credit card bonus awards.
There are two costs of changing bank accounts. The first and most obvious is the financial aspect: How much money will it cost you to switch bank accounts? The second is the cost of your time and effort: How much work will it be? Generally speaking, the former usually outweighs the latter. Items such as automated bill payments, online shopping information, and regular deposits or withdrawals need to be looked after lest they incur problems or penalties for not being set up with a new account. Proper planning is needed to make sure you avoid NSF fees that can eat into your budget. In short, if the difference in fees or features is minimal, consider that the effort you invest may not be worth the switch to a new bank.
Financially speaking, the cost of closing or changing accounts is limited – as is that of opening new ones. When you close an account, you will have to pay any existing debts: this is the most significant financial effect that most people will encounter. However, a hard requirement like this can be a great motivator to settle your finances and get yourself thinking debt-free. Many people also worry that switching banks or closing accounts will have a negative effect on their credit scores – much like the effect of closing a credit card. Fortunately, this is not the case in the vast majority of switches.
Is it time to look to a new bank, credit union or alternative financial services provider? It’s up to you (and the advice of a professional financial advisor, if you have access to one) – but it’s a change that more Canadians should get comfortable with making.