CLEVELAND - Saturday is ‘Bank Transfer Day,' the Facebook movement that is encouraging people to consider moving their money out of big banks and into credit unions. Tens of thousands of people have pledged to take part.
But Bill Mahnic, an associate professor of banking and finance at Case Western Reserve University, doesn't think all of those people will really make the change from banks to credit unions on Bank Transfer Day.
"You have vested time and financial interest in your relationship with your bank, and I think it takes more than a couple small fee increases to get people to move," Mahnic said.
He expects fewer than 2 percent of bank users to move their money for Bank Transfer Day.
If you do decide, now or later, to move your money from one financial institution to another, there are some things to keep in mind.
Is it the right time to switch?
There are several questions to consider about whether you should switch now. Financial credit experts at Dun and Bradstreet suggested the following factors to determine if the time is right for a change:
* Will your bank extend you credit? Banks usually focus more on clients who borrow money. If your bank rejects your loan applications, it's probably also not giving you the best service.
* Are you getting what you pay for? Full service banks tend to have more, higher fees. Take an inventory of the services you want and use, and decide if what you're paying for them is worth it. Also, are you getting personal service at your local branch, or do you have to deal with the corporate office?
* Is the bank supportive if you get into financial trouble? In these tough economic times, one of the most important services may be helping you get through financial difficulty if you lose a job or have other problems. So find out if your bank will work with you on loans and other credit payments until you get back on your financial feet.
And if you can't decide if a bank or credit union is right for you, Mahnic said, "If your banking needs are very simple, very plain and limited, credit unions will be a lot cheaper for you."
Credit unions usually have fewer fees and pay higher interest rates on savings, while banks usually offer more mobility and one-stop shopping for all types of financial needs.
If you want to avoid paying fees at any financial institution, be sure to know the terms and conditions of your account, such as balance minimums and monthly usage fees.
As for the safety of your money, federally insured credit unions have a system similar to the FDIC for banks.The National Credit Union Administration is government-backed, and covers up to $250,000. There are private insurance options for credit unions as well.
Steps to switch
Once you make the decision to switch and have chosen your new bank, there are a lot of steps to make sure that the transition is smooth and all your bills get paid.
Consumers Union , which publishes Consumer Reports, recommends this process to ensure that everything is covered and you're not left short of cash:
STEP 1: Open your new bank account with a small deposit—just enough to avoid any low balance fees. (Then as you transfer more money, you can do it easily electronically)
STEP 2: Make a list of all your automatic payments and deposits that come in and go out of your current account, and the dates they transfer.
STEP 3: If your paycheck is direct deposited, this is the first thing to change over to your new account. Ask your employer to make the change, and find out the date for the first deposit.
STEP 4: Based on the date of your first direct deposit into the new account, reschedule all your automatic bill payments or debits to come out of the new account. Some changes may not take effect until the next billing period, so ask the company when the switch will take place, and make sure you keep enough cash in the old account to cover final payments.
STEP 5: Leave a small amount of cash in your old checking account for at least one month after the switch to cover any payments you might forget about.
STEP 6: Once you have all automatic payments and direct deposits flowing through your new account, electronically transfer any remaining funds into your new account—that's the fastest and safest way to make the transfer.
STEP 7: When the final transfer clears, close the old account. Just transferring out all your money doesn't close the account—you have to follow your bank's procedures, and get written confirmation of the closure.
STEP 8: Make sure that you update accounts with online merchants, such as Amazon.com or Paypal, with your new account information.
Depending on how many automatic payments and deposits are tied to your bank account, it can take a couple of hours to transfer all your accounts, and then a couple of months of monitoring to make everything is working and all your bills are paid.