The Big Switch: Just How Hard Is It to Change Banks?

WASHINGTON — During the Great Depression, many Americans responded to financial cataclysm by stuffing cash inside their mattresses.

This time, we're taking less extreme measures. We're merely moving our money to another bank.

While undoubtedly a smarter choice, it's also proving to be considerably more complicated than cutting a hole in your Sealy and jamming it full of greenbacks.

First there's the process of choosing a new bank. Then there's the need to open a new account, and to figure out how to disentangle every part of your life from your old bank. Finally, it's necessary to cut ties with the old place without incurring any costly fees. The whole process can easily take weeks or even months.

So how hard is it to switch banks? The answer will play a major role in determining the pace of change in retail deposits over the coming months and years.

Clearly, the number of Americans who are switching banks is now on the rise, as many customers of large banks, long accustomed to free checking accounts, will soon get hit by a wave of new fees.

Bank of America's $5-per-month debit-card fee has gotten the most attention, but in the wake of a new regulation that limits the amount of revenue generated when consumers swipe their debit cards, other big banks are instituting their own charges.

These fees are part of a strategy by some large banks to shed certain customers, especially those who don't maintain hefty balances and don't have a mortgage or another important relationship with the bank. Small banks, credit unions, and Internet banks, all of which have an easier time turning a profit from consumer accounts, are likely to be some of the biggest beneficiaries.

In 2010, U.S. banks with $50 billion or more in assets lost about 4 million more customers than they gained, according to an estimate by Michael Moebs, an economist who is the chief executive of Moebs Services, Inc. This year, he estimates that those same banks, the 34 largest banks in the United States, will lose 9 million-12 million more customers than they add.

"And the small guys are getting them," Moebs said in an interview. "There's no doubt about it."

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Like a lot of people I know, I long had a vague feeling that my bank didn't particularly value my business.

When I moved to Washington, D.C. in late 2008, I opened checking and savings accounts at B of A. My decision was based entirely on convenience. B of A's ATMs were ubiquitous, and they had a branch right outside my subway stop.

I didn't have a mortgage or a B of A credit card, so the Charlotte-based bank had only a few ways to make money from me. In theory, they could charge me fees for overdrafts and the like, but I'm typically careful enough to avoid those charges.

They could lend my money and make a profit on the spread, but I maintained a relatively small balance, which meant this revenue would be modest. All that remained, in terms of B of A's ability to profit from my business, was the revenue it collected every time I made a purchase with my debit card. Of course, that revenue has fallen recently.

The end of 2008 was an exceedingly tumultuous time for B of A, as it took $45 billion in bailout funds while trying to absorb Countrywide and Merrill Lynch. But for a time I got the sense that B of A was trying to hold on to customers like me. In late 2009, a sign in the window of my branch offered customers a one-time payment of $35 for using their online bill pay service. I tried it, and found it hugely convenient.