There’s never been a better time to switch from your bank to a credit union.
From ever-rising fees, to poor service, to criticism over aggressive sales practices, Canadian banks have come under heavy scrutiny in the past year. So what stops angry and frustrated bank customers from immediately closing up their bank accounts and embarking on a new relationship – with a credit union?
At YNCU, the number #1 reason we hear is ‘it’s too much work to switch.’ And the truth is it can be complex and time consuming. On the other hand, it can be a smooth and relatively painless experience. Much depends on attitude, as well as having an organized approach.
Here are some things to consider if you’re planning to switch your bank accounts:
Chequing and savings accounts
Your first step is shopping around and deciding where you are taking your business. Before closing out your bank account, open up a personal chequing or savings account at your new financial institution.
Remember to go through several monthly statements from your existing account since they’ll have nowhere to go once you close your old account.
Here’s a handy account switching checklist courtesy of Your Neighbourhood Credit Union.
Depending on your bank, you can close a chequing or savings account at a branch by phone or online. There is usually no fee to close a chequing or savings account. BMO charges a $20 fee if the account is closed within 90 days. CIBC charges a $20 fee to close and/or transfer accounts to other financial institutions. Royal Bank’s $20 fee is waived if you close the account in person.
Credit cards and bank accounts are independent of each other. So you can have a credit card with one financial institution and a bank account elsewhere. Cancelling a card can be done at a branch or by phone and should be effective immediately.
There is no fee to close a credit-card account. Of course, you still have to pay the outstanding balance, fees, carry-overs and interest.
Remember that pre-authorized payments set up on the credit card will no longer be processed, so you’ll need to provide billers with your new credit-card number.
You will first need to decide which new personal-loan product you want and apply for it through your new lender.
Once you’ve qualified, you’ll need to notify your current lender in person and pay the balance plus interest either by cheque or debit at the time of closing, or your new financial institution can arrange to pay out the loan for you.
For a conventional mortgage, it’s a good idea to wait until the mortgage term matures to avoid paying penalties. But you should start looking at mortgage rates several months before your term ends.
Plan to give yourself several months before the renewal date to pre-qualify with a new lender (you can lock in a rate 90 days in advance of the renewal date). This lead time allows the financial institution to process your mortgage application, which requires a property appraisal for a fee and proof of income and employment. The lender also needs to do paperwork to get a payout statement from your current lender indicating the mortgage balance.
Banks will charge a discount fee of several hundred dollars to transfer the mortgage title to your new lender but credit unions will sometimes cover it (try to negotiate this!).
If you decide to transfer your mortgage before the term matures, you’ll have to pay a penalty. Your mortgage document will have the formula to help you estimate the amount. But your bank will tally the exact amount.
Remember to provide the new mortgage details to your home insurer.
You can hold your registered savings wherever you want, including those that are employer-matched. In addition to simplified record-keeping (one statement and one slip at tax time), consolidating your savings means you could get a better rate on higher balances.
To transfer registered investments, such as RRSPs, RIFs and TFSAs, you’ll need to meet with your new financial institution and bring your statements. Once you settle on the appropriate investment vehicle, the adviser will fill out a transfer authorization form, which will be sent to your bank to request the transfer.
There is a transfer-out fee per transfer. Since you’re a new customer, it’s worth asking your new financial institution to cover this fee.
The transfer process takes several weeks to complete.
If you hold non-registered investments, such as GICs or term deposits, it’s advisable to wait until the maturity date to transfer them to avoid penalties.
Source: Chu, Showwei. How to Break up with Your Bank. Special to The Globe and Mail. Published Thursday, Apr. 06, 2017.