Shock Your Banker by Finding a Better Deal

by Kevin on October 16, 2009

Two months ago I closed our old brick-and-mortar checking account. We recently discovered and opened a high-yield reward checking account. We’re getting 4.41% on our checking. Yea — good deal. It was time to kiss our old account goodbye.

How to Close a Checking Account

I was surprised at how easy closing our checking account turned out to be. You should have seen the look on the banker’s face when I told him why I was closing the account!

Here’s how it went down:

Is there anything we can do to keep your business?“, he asked in polite banker-speak.

“Well my new account is paying 4.41% on my checking account. Can you beat that?”, was my reply.

(Jaw hits floor, blank unbelieving stare back at me)

“Yea, it is a really good deal. Please close the account.”

Five minutes later I walked out with cash in hand — headed straight for our new bank.

Why We Kept a Non-Interest Paying Account

We kept an account open at a brick-and-mortar bank so we could write and cash checks. We don’t do this very often so we kept minimal amounts of money with that bank. Good thing, too, since it didn’t pay a dime of interest.

Of course as part of the trade for not getting paid interest we also didn’t pay any fees.

Before I closed this account I wanted to make sure the new account was fully operational. I waited a few weeks to get our checks in the mail and verified direct deposit had switched.

Everything was working, so we made it official. One account closed, another much better account opened.

Don’t Be Easy Bank Profit

Banks make profit by taking your deposits and lending them out at an interest rate higher than what they are paying on your deposits. In my case they were earning maximum profit because they didn’t pay me a cent of interest!

I’m not anti-banker. I’m not anti-capitalism.

But they aren’t exactly on your side. They want to make money off of you.

Your banker isn’t going to call you to tell you about a great new account they have that is going to make you (and cost her) money.

In fact if my banker called me, I would worry. I see only two reasons that my bank would ever call me:

  • There is either something wrong with the account (overdrawn, late payment, etc.) that is potential risk to the bank (cost)
  • They want to sell you something (revenue)

Shock Your Bank Today

What are you waiting for? Why are you putting up with poor customer service, low rates, or high fees?

Drop your bank a cordial “Let’s just be friends, okay?” and start making some money!

Don’t know where to find a better banking deal? Here are a few banks I have personal experience with that I highly recommend:

  • ING Direct – rates are pretty low right now (although likely higher than your local brick-and-mortar bank), but you simply can’t beat the customer service. Bonus: if you open an account with $250 or more, you get $25
  • Ally Bank – I recently opened an account with Ally Bank to try out their online certificates of deposit. Ally’s rates have been very competitive (in fact they are the best I can find on a national level). If you need to park money or want to start a CD ladder, I recommend Ally Bank.
  • Find a local high-yield rewards checking account like we did

{ 10 comments }

Financial Samurai October 16, 2009 at 3:27 pm

I tell ya, all ya gotta do is ASK the bankers for a better deal. Commercial banks are a dime a dozen, they’d be foolish to let go of business already captured, unless your account is too piddily to matter.

Kevin October 19, 2009 at 8:44 pm

An interesting idea, but I just don’t see large banks caring if you walk away. Most people don’t have enough money for them to really care.

Golfing Girl October 19, 2009 at 6:47 am

Ouch. I work at a bank and I don’t feel you’re painting a fair picture. Banks do a little more than steal from the average savings account holder. The reality is that most people don’t keep a high enough checking balance to go to the effort to find a high yield account. Therefore, when you’re looking to refinance your mortgage or get a car loan, if you have several accounts with your local branch, you’re going to get preferential treatment for being a loyal customer. Plus I like dealing with a real person who can straighten out any problems I have.
Yes, we make money by lending out deposits. That’s what banks do. But we also provide a safe, secure, FDIC insured place for you to keep your money– with quick access to your funds–not the usual 3 business days or more that a high-yield online account requires.
However, if you are constantly overdrafting your account and are sending your banker to Hawaii with the fees you generate, I don’t recommend tradional accounts for you. Only those who actively manage their accounts benefit from the services from your average financial institution.

Kevin October 19, 2009 at 8:51 pm

Said like a banker! 😉

I didn’t say they were stealing. I’m pro-capitalism. But banks take advantage of a large portion of the population that are dumb enough to take interest rates below 0.5%. Even if you had $100,000 at 0.5% that is $500. So of course most people don’t have enough for it to matter!

I disagree that you get preferential treatment if you have an account at a bank. Simply not true for most institutions. They want you to think that so you will go to them and they can make money off of lending to you — not to give you the best deal. (In fact when we were looking for mortgages to buy our home the loan officer from the bank we had accounts with never called us back after the initial meeting. Just one example of course, but that was my experience.)

Also you shouldn’t be looking for a car loan in the first place, so I don’t buy that argument either. Yes most people will get a mortgage and that’s fine — we have two, unfortunately! — but you can get just as good if not a better deal by being an informed consumer, knowing what rates to expect, and negotiating.

Every bank that you would ever want to do business with is FDIC insured, no?

I’m not talking just about online accounts that take 3 days to clear. If you can find a brick-and-mortar, “real” bank to give you a better deal… that’s what I’m talking about. The 4.41% checking account deal we found is a local, smaller bank. We get the customer service (if we ever needed it) of a real person and the rate of an online account. Best of both worlds.

Cheapskate Sandy October 19, 2009 at 8:52 am

My BF keeps wondering why I tell him to close his regular savings account. The fact that its current interest rate is %0.01 never occurred to him. Consumers have to pay attention when interest rates continue dropping. People sometimes assume that everyone’s rates are the same when a little finger work can pay off big time.

Kevin October 19, 2009 at 8:52 pm

Being an informed consumer is huge! Take that 0.01% to 1% and you’ve just increased your interest 100 fold. Not much difference on small amounts, but on larger…

Financial Samurai October 19, 2009 at 8:13 pm

Golfing girl, great perspective. Too often we paint all people with one brush stroke.

Golfing Girl October 20, 2009 at 6:49 am

I’m sorry your financial institution didn’t care that you walked away. The reality is that it is much more costly to attain a new customer than retain a current one. Your bank isn’t in it for the long haul to partner with you with that attitude! Kudos for not putting up with it. (Disclaimer: the bank I work for is a pretty large institution so I think it’s possible to be big and still care about keeping clients happy.)

Our institution is all about preserving relationships (especially those with 5 or more services) and is willing to provide exceptional customer service and discounts to those clients. We also have never done exotic mortgages and other such antics because it’s simply not in the best interest of the client (or ultimately us).

Often when community banks offer those “teaser” rates you speak of, they are severely undercapitalized and are desperate for the funds for fear of the Fed stepping in. They’ve had to tighten up their credit and can only start lending again if they pull in all those deposit dollars to fund loans. It’s a balancing act so when you see rates out of whack with competition, you know there’s a reason behind it (whether loan rates or deposit rates).

Kevin October 20, 2009 at 7:29 am

Honestly I felt like the people I were talking to at the bank could care less about closing any account — especially after I told them I was getting 4.41% and they knew they couldn’t touch it.

I was worried about the rate on the new account. But when I sat down with the person that was opening our account he said that rate had been in place since January 2008 — the rate previous to that was something like 5.61%. That helped ease the fears that it was a teaser rate… if they kept 4.41% through all of last year that is pretty strong in my opinion. I doubt they would be undercapitalized for years.

But if it goes away I have no hesitation in moving on to find the next best deal. It’s all about being an informed consumer.

Golfing Girl October 20, 2009 at 6:52 am

One last tidbit from the bank’s perspective. If you bank seems almost happy to let you go, it may be that you are too expensive to keep as a customer (i.e., you are a very service-needy client who provides little income, always asks for legitimate fees to be refunded, etc.).

Okay, no more secrets revealed today… 😉

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