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By Christine Benz | 11-01-2011 12:17 PM

Glink: Think Twice Before Ditching Your Bank

Customers underestimate the work involved with moving banks and should explore their options before jumping ship, says personal finance expert Ilyce Glink.

Christine Benz: Hi, I'm Christine Benz for Morningstar.com.

With many of the big banks layering on new fees or increasing their existing ones, many consumers are shopping around for cheaper options.

Here to discuss some of the key factors to consider before dumping your bank is Ilyce Glink; she is a syndicated financial columnist.

Ilyce, thank you so much for being here.

Ilyce Glink: It's a pleasure.

Benz: So Bank of America started this whole thing by saying it was going levy this $5 per month fee on debit card users. What are some of the key fees that are being assessed, new fees or maybe additions to existing ones? What's the landscape right now like?

Glink: That Bank of America $5 a month debit card fee for its 37.5 million users just seemed so enormous and so draconian. You are talking about $60 a year. Credit cards are free. I mean you have to be able to get one, of course.

But that just seemed--it seemed like a very ill-timed announcement. It came right on the heels, the week after or the day after the government's new rules went into effect limiting how much card issuers can actually charge merchants. And so, it looked just like a payback, right? "Well, if we can't get the money from the merchants, we'll get it from consumers." The National Foundation for Consumer Credit just issued a new survey announcing that the vast majority of consumers were ready to vote with their feet and leave a financial company, if they were going to charge those kinds of rates, and I think all of the industry, the banking industry, was pretty surprised at the vehemence.

Now I know behind the scenes all of the big banks have been testing this. Chase had been testing $3 a month fee. You had Wells Fargo testing fees, and they weren't doing it all over the country. Just Bank of America was the first one to announce it. So they were the ones who got slammed.

Now I am told, Chase is going to back down, Bank of America is backing down, and everything is going to be normalized. But it's interesting that none of them, I guess, tested or did the right focus groups with consumers to learn how upset people would be.

Benz: So assuming that you are fed up with your bank for whatever reason--whether a debit card fee or there are some other smaller fees that you're seeing starting to appear--what are the key factors you should bear in mind if you are trying to comparison shop, compare what you've got with your current bank, versus some other options that might be out there?

Glink: Well, it's interesting. It's multi-faceted. There is no one solution for anybody, because some people may have a lot of cash, and then they won't pay fees. Some people won't have any cash, but they have a lot of different kinds of accounts--they have become a very profitable customer for a bank. So I think the first thing you have to do is take an assessment of where you are. What kind of cash do you have, how do you actually use the different accounts you have at a bank? Are your accounts spread out or can you aggregate them together?

Benz: Are there benefits to doing that?

Glink: Absolutely. I mean, if you can link accounts, typically fees go away, because you become a more valuable customer. In fact, it's a little like shopping around for insurance. If you could put auto and health and life and ... homeowner's insurance or renter's insurance, if you can put all of those together, you get a much bigger discount across the whole divide. Same thing is true when you get to banks.

But there are other kinds of fees involved as well. Like, for example, I was looking at my own online bank account this morning. I wanted to pay a vendor, and I have well over a 100, maybe even 200 companies that I have done business with over the last five or seven years. So if I decide to switch banks for my business, or even my personal accounts, I would have to take all that information and re-enter it into the new payroll system, and that's going to take a significant amount of time. I have I don't even know how many accounts that auto-debit or auto-deposit into those accounts. Those all have to be changed, and you can't forget or you could wind up missing a mortgage payment or missing a credit card payment.

So I think people underestimate what value their time has, and they forget to kind of look at all of these different facets before they go ahead and they say, "I am so mad. I'm just going to leave."

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