Whether to switch banks depends on what your current bank charges, what interest it pays, and how often you actually use the account

If your bank charges monthly fees on your savings account, pays almost no interest, or makes it hard to deposit money, moving to a different bank usually makes sense. The actual cost of staying matters more than brand loyalty. A bank that charges $5 a month in maintenance fees costs you $60 a year — money that could sit in a savings account earning interest instead. The decision comes down to three things: what you are paying now, what you could pay elsewhere, and whether the switch is worth your time.

Opening a new account at a different bank does not close your old one automatically. You control when and whether to close the old account, so you can test the new bank first. Most people keep both open for a month or two, move their direct deposits over, and close the old account once they are sure everything works. This takes an afternoon of paperwork, not weeks.

Key Takeaways

  • Monthly maintenance fees, low or zero interest rates, and inconvenient branch locations are the most common reasons to switch banks.
  • Online banks and credit unions often charge no monthly fees and pay higher interest than traditional banks, but you cannot deposit cash in person.
  • You do not have to close your old account when you open a new one — test the new bank first, then close the old account later.
  • Moving your direct deposit and automatic payments takes a few days to process, so plan the switch for a time when you do not need immediate access to money.
  • Some banks offer switching bonuses of $50 to $300 for opening a new account and meeting deposit or transfer requirements.

What makes one bank cheaper than another

The main cost difference between banks is the monthly maintenance fee. Traditional banks often charge $5 to $15 per month unless you keep a minimum balance (usually $500 to $2,500) or set up direct deposit. Online banks and credit unions typically charge zero monthly fees, period. If you cannot meet your current bank's minimum balance requirement, you are paying for an account that costs nothing at other institutions.

Interest rates matter just as much over time. A savings account at a traditional bank might pay 0.01% annual interest — meaning $100 in the account earns 1 cent per year. An online bank might pay 4% to 5% on the same $100, earning $4 to $5 per year. On $5,000, the difference is $50 to $250 per year. Over five years, that gap grows to $250 to $1,250. The interest rate changes based on what the Federal Reserve does, so rates vary month to month, but online banks have consistently paid more than traditional banks for the past several years.

Some banks also charge fees for things you might actually do: transferring money out, making more than a certain number of withdrawals per month, or using an out-of-network ATM. Read the fee schedule on your current bank's website and compare it to banks you are considering. The difference adds up faster than you think.

Online banks versus traditional banks and credit unions

Online banks have no physical branches, which is why they charge no monthly fees and pay higher interest — they have lower overhead costs. You deposit checks by taking a photo with your phone, and you withdraw money using any ATM (though some charge a small fee per withdrawal). Transfers between accounts take one to three business days. If you need to deposit cash, you cannot do it at an online bank directly — you would have to transfer it through another bank first, which is inconvenient.

Traditional banks have branches where you can walk in, deposit cash, and talk to a person. They charge monthly fees more often than online banks, and they pay lower interest rates. But if you deposit cash regularly or want to speak to someone in person, a traditional bank might be worth the cost. Some traditional banks now offer no-fee accounts if you meet certain conditions, so it is worth asking your current bank what they offer.

Credit unions are member-owned, not for-profit institutions. They often charge no monthly fees and pay competitive interest rates, similar to online banks. You can usually deposit cash at a credit union branch. The catch: you have to be a member, which usually means living or working in a certain area, or having a family member who is already a member. Credit unions also tend to have fewer branches and ATMs than big banks, so access depends on where you live.

How to move money and set up direct deposit at a new bank

Opening a new account takes 10 to 20 minutes online or in person. You will need a government ID, your Social Security number, and proof of address (a recent utility bill or lease works). The bank will run a background check through ChexSystems, a database that tracks banking history — most people pass this instantly, but if you have unpaid overdrafts or fraud on your record, some banks will decline you.

Once the account is open, move your direct deposit by giving your employer or benefits provider the new bank's routing number and your new account number. This usually takes one to three business days to take effect. Do not close your old account until at least one direct deposit has hit the new account and you have confirmed it arrived. If something goes wrong, you still have access to your old account.

For automatic payments (bills, subscriptions, rent), log into each service and update the bank account information. This also takes one to three business days to process. Some people move their direct deposit first, then update automatic payments over the next week or two. There is no rush — just make sure you know which payments are coming out of which account so you do not overdraft.

If you have a large balance in your old account, you can transfer it to the new account using an ACH transfer (Automated Clearing House), which is free and takes one to three business days. Some banks offer this directly through their website; others require you to call or visit a branch.

When switching banks is not worth the effort

If you use your savings account only once or twice a year and keep a small balance, the difference between a $5 monthly fee and zero fees might not matter enough to justify the switch. The time you spend moving direct deposits and updating payments could be worth more to you than the $60 a year you would save. This is a personal call.

If you have a strong relationship with a local bank — you know the staff, they have helped you through financial problems, or you use other services there like a checking account or loan — staying might make sense even if the fees are slightly higher. Banking is not purely a math problem; convenience and trust matter too.

If your current bank offers a switching bonus (sometimes $50 to $300 for opening a new account and meeting deposit requirements), that can offset the inconvenience of the move. Check whether your bank advertises a bonus before you decide to leave.

What to do with your old account after you switch

You do not have to close your old account right away. Many people keep it open for two to three months while they confirm that direct deposits, automatic payments, and transfers are working correctly at the new bank. Once you are confident, you can close it by calling the bank or visiting a branch. Some banks let you close accounts online.

Before you close, make sure the balance is zero or that you have transferred any remaining money out. Check your account one more time to confirm no automatic payments are still coming out of it. If you close an account with an outstanding balance or pending charges, the bank may send you to collections.

Closing an account does not hurt your credit score. Your credit history stays on your record, and closing one savings account does not change your credit report. The only time closing an account matters for credit is if it is a credit card or line of credit — savings accounts do not factor into credit scores.

Frequently Asked Questions

Will switching banks hurt my credit score?

No. Closing a savings account does not affect your credit score at all. Credit scores track credit history — loans, credit cards, and payment history — not savings accounts. You can open and close savings accounts without any impact on your credit.

What if my new bank loses my deposit during the transfer?

ACH transfers are insured by the Federal Reserve, so if money disappears in transit, the sending bank is responsible for replacing it. This is extremely rare. If a transfer does not arrive within three business days, contact your new bank immediately and they will investigate. Keep your transfer confirmation number in case you need to prove you sent the money.

Can I keep both accounts open at different banks?

Yes. Many people keep a savings account at one bank and a checking account at another, or maintain backup accounts in case one bank has technical problems. There is no rule against having multiple accounts. Just make sure you track which bills come out of which account so you do not overdraft.

How long does it take to switch everything over?

Opening the new account takes 10 to 20 minutes. Direct deposits and automatic payments take one to three business days to update. Most people are fully switched over within a week, though it is safer to wait two weeks before closing the old account to make sure nothing is still pending.

What if I cannot meet the minimum balance at my new bank?

Most online banks and many credit unions have no minimum balance requirement at all. If your new bank does require a minimum, read the fine print — some waive it if you set up direct deposit or keep a certain amount in a checking account at the same bank. If you cannot meet it, choose a different bank instead of paying fees.