Outrage over fees assessed by banks on checking accounts and other unfair practices has led to consumers attempting to leave their institutions in droves. But as a new report by Consumers Union points out, banks throw up a myriad of obstacles that can confuse consumers who are trying to switch banks.
“Consumers may be fed up with their bank but they can encounter roadblocks that make moving their money a real headache,” said Suzanne Martindale, staff attorney for Consumers Union. “Some bank policies are designed to make it challenging for customers to walk away. That creates customer inertia and stifles competition, making banks less responsive to what consumers need.”
So what do you need to know? First, opening a new account at another financial institution can take time, a few days or even a few weeks. After you transfer direct deposits and automatic payments out of the old account and into the new account, that’s the time to close your old account and move funds into the new one.
That’s where it can get tricky, even for the savviest consumer, says Consumers Union. It reviewed bank policies at the top 10 retail banks in the U.S., along with a survey of banks and a secret shopper investigation, and found a bunch of roadblocks in the process of switching banks.
â€¢ Banks try to ensnare customers with new products, making it harder for you to move. Re-routing your automatic payments and deposits can take four to six weeks, in an often intimidating, complicated process that discourages you from switching. It can also be tough to have enough money to maintain two accounts during the switch.
â€¢ Fees to close accounts and transfer money can be another obstacle at banks like HSBC, PNC, and US Bank, where customers are charged $35 to close any account open for fewer than 180 days. BB&T and Citi charge a $25 fee if the account is closed within 90 days.
â€¢ Zombie accounts are a problem as well – Chase and Bank of America sometimes reopen old accounts after they have been closed by customers. These accounts can result in customers owing money in penalty fees or monthly maintenance.
Consumers Union is calling on Congress and the Consumer Financial Protection Bureau to consider a number of policy changes to enhance consumer choice and bank competition.
â€¢ Banks should be required to bear the responsibility for transferring a customer’s automatic payments and deposits from the old account to the new account within 14 days
â€¢ Banks should provide same-day electronic fund transfers at no cost to consumers
Check hold times should be reduced so consumers can quickly access deposits in new accounts
â€¢ Banks should be prohibited from assessing unfair fees for closing accounts
â€¢ Banks should be prohibited from reopening accounts after consumers close them
â€¢ Banks should be required to provide clear and accessible account closing procedures
â€¢ Bank regulators should examine the feasibility of portable bank account numbers to facilitate easier bank switching.
For tips on switching banks, check out Consumers Union’s “Move Your Money Checklist.”