3 Reasons Bank Loyalty Could Be Hurting Your Finances
Written by
Cindy Lamothe
Edited by
Rebekah Evans
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Most of us have that one bank we’ve been with for years — maybe even since we were teens. But have you ever stopped to think if sticking with that bank is really helping your finances?
While loyalty to your bank might feel like the right move, there are actually a few reasons why it could be holding you back financially.
“I get it — switching banks is last on your list of things you want to do with your free time,” said Bethany Hickey, personal finance expert and banking editor at Finder. “It’s a pain to switch over all your automatic payments, get a new debit card, move money to new accounts and then download another banking app.”
She said it’s easy to get complacent with your current bank, but taking the time to find a great bank with high interest rates, low fees and good customer service can pay off more in the long run.
Here’s a look at why it might be time to reconsider your bank loyalty.
You’re Leaving Money on the Table
When it comes to your personal finances, loyalty to your bank might be costing you more than you think. By sticking with the same bank for years (or even decades), you could be leaving money on the table in several ways.
For starters, banks often offer limited options or outdated features compared to newer or more competitive institutions.
For example, you could be missing out on higher interest rates on savings accounts or lower fees that some banks offer. “I’ve worked in banking for years and let me tell you — bank loyalty is costing people thousands,” said Andrew Lokenauth, money expert and owner of BeFluentInFinance.
Just last month, he helped a client who’d been with the same bank for 15 [or more] years realize she’d lost out on $7,000 [or more] in interest by not shopping around. “Makes me frustrated seeing folks leave money on the table like that,” Lokenauth added.
The thing is, banks totally count on this misplaced loyalty.
They know most people won’t switch, so they offer garbage interest rates to existing customers while giving sweet promotional deals to new ones.
Lokenauth said he’s seen it firsthand — his old bank was paying 0.01% APY on savings while competitors offered 4% or more. “That’s a massive difference when you’re talking about serious money,” Lokenauth said.
You’re Losing a Fortune on Bank Fees
Bank fees are one of the sneakiest ways people lose money without even realizing it.
When you’re loyal to the same bank for years, you might not even notice how much you’re paying in monthly maintenance fees, ATM withdrawal charges, overdraft fees or even foreign transaction fees.
Needless to say, these costs can add up quickly and over time, they can drain your savings or limit your ability to build wealth. “Don’t even get me started on the fees,” Lokenauth said.
He explained that he recently analyzed checking account fees across major banks and the difference between highest and lowest was about $300 annually.
His biggest realization? Your “relationship” with your bank won’t save you from monthly maintenance charges, overdraft fees or ATM costs. “They’re banking on you being too lazy to look elsewhere,” he added.
And the thing is, many online banks have little to no fees, according to CBS News.
You’re Missing Out on Premium Perks
When you stick with the same bank for years, you might be missing out on some seriously great perks that could make a real difference in your financial life.
Premium banking perks are often reserved for customers who are willing to shop around and take advantage of the best offers, but sticking with your current bank might mean you’re not getting the full benefits available to you. “The perks situation drives me nuts too,” Lokenauth said.
Working at different banks, he saw how the best sign-up bonuses and rewards were always reserved for new customers. “We’re talking $200 to 500 cash bonuses, premium credit card rewards and mortgage rate discounts that existing customers never see,” he explained.
He said his sister finally switched banks after 12 years and got a $400 bonus plus way better perks. “Her old bank never offered her anything,” he added.
Reminder: Consider All Things
Here’s the real kicker, according to Lokenauth: banks spend about five times more marketing to new customers versus keeping existing ones happy.
That’s your money they’re using to attract others while giving you subpar service. “I’ve had clients discover they could get free checking elsewhere while paying $15 monthly fees at their current bank,” he said.
The thing is, technology has made switching banks so simple now. “Most of the ‘it’s too complicated’ excuses I hear don’t hold up anymore,” Lokenauth said.
You can open accounts online in minutes and easily transfer everything over. He said the temporary hassle is worth the long-term savings. “I’ve seen people save $500 to $1000 [or more] annually by making a switch,” he added.
There are plenty of banks out there offering lower fees, higher interest rates and exclusive benefits that could help you save money and get more value from your finances.
It’s time to take a step back, reassess your options and consider whether your bank is truly working in your best interest. Making a switch could be one of the best moves you make for your financial future.
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