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Ask the expert: Should I switch before my bank sells out?

July 07, 2011

By Richard Barrington | MoneyRates.com Senior Financial Analyst, CFA

Q: I'm reasonably happy with my current bank, but it keeps being rumored to be planning to close or sell off branches as a cost-cutting measure. Should I ignore the rumors, or should I be looking for another bank?

A: The banking industry tends to go through waves of business shake-ups, which include consolidations, mergers, and acquisitions. Current conditions might be ripe for one of those waves. Slow business conditions have created cost pressures at some banks, while depressed valuations in the industry make some targets attractive for acquisition. Meanwhile, a changing regulatory environment is altering the financial dynamics of the banking business, and institutions are still coming to terms with that.

Ironically, while this means that something may indeed come of the rumors you are hearing about your bank, you won't be immune from the possibility of organizational change if you switch banks. That kind of change might just be part of the banking landscape for a while. The good news is that when these changes occur, the effect at the local level tends to trickle down slowly. That means you should have plenty of time to make an orderly transition, if necessary.

Another way to look at the situation is that as a banking customer, you should always consider yourself a free agent. Your bank may make changes in service and account terms at any time, so why shouldn't you be equally open to changing your bank? Keep an eye on the market, and compare your bank with other options out there. Does your bank offer free checking accounts? Are its rates on savings accounts and money market accounts competitive? How does your bank stack up against the best CD rates on the market?

For all the changes in the banking industry, one constant is that there are a great many choices out there. Use that to your advantage.

Got a financial question about saving, investing or banking? MoneyRates.com invites you to submit your questions to the "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.

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