Why Americans Hesitate to Switch Banks

According to a recent survey by NerdWallet, a striking one-third of Americans with bank accounts (33%) are unwilling to change banks, primarily due to the monthly account management fees — no matter how high those fees may be. This finding aligns with further insights from NerdWallet’s extensive analysis, shedding light on the behaviors and attitudes of U.S. consumers when it comes to banking fees.

The Survey Insights

In June 2018, The Harris Poll surveyed over 2,000 American adults online, gauging their openness to paying monthly management fees for their financial accounts and identifying the threshold that might compel them to switch banks. A notable takeaway? On average, the fee that could persuade a bank account holder to switch is pegged at around $16.30.

Generation Gaps in Fee Sensitivity

Younger generations emerge as less sensitive to banking fees compared to their older counterparts. For instance, millennials are willing to accept an average monthly management fee of $19.10, while Generation X would balk at $15.80, and baby boomers at $13.20. Meanwhile, the silent generation shows even more caution, with an average threshold of just $11.60.

Resistance to Fees in Investment Accounts

Interestingly, many Americans are resistant to paying management fees at all. A staggering 52% refuse to pay fees for workplace retirement accounts, and 53% feel the same about IRAs and brokerage accounts. The reluctance extends even further, with 62% refusing fees for checking accounts and 66% for savings accounts.

Understanding Bank Fees

Regular bank and investment accounts often come with unavoidable fees. Checking and savings accounts might have maintenance fees that can be sidestepped, while workplace retirement accounts and IRAs generally impose costs that are harder to evade. NerdWallet’s investing specialist, Arielle O’Shea, notes that many investors end up incurring expense ratios, which can accumulate to significant amounts over time.

Switching Banks: Worth the Effort

While the thought of switching banks may not be the most thrilling task, it is often a savvy move for those burdened by high monthly fees. According to NerdWallet, many traditional bank customers could be paying around $17 monthly in maintenance fees across checking and savings accounts. Notably, over a quarter of account holders (26%) might consider switching banks for monthly fees under $10.

Exploring Alternatives

Despite common perceptions, many banks offer ways to waive maintenance fees. As Kimberly Palmer, NerdWallet’s banking expert, advises, consumers today have a wealth of options — from online banks to credit unions — where they can compare fees, interest rates, and convenience before making a switch. While the transition may involve updating automated payments and direct deposits, the potential savings can accumulate significantly over time.

Generational Attitudes Toward Fees

Post-millennials exhibit a remarkable willingness to pay management fees, particularly for workplace retirement accounts, where 71% are open to such costs. In contrast, only 21% of the silent generation show a similar willingness. Furthermore, the threshold at which younger individuals might switch banks is noticeably higher, accommodating fees close to $30.80, compared to just $11.60 for the silent generation.

Gender Differences in Fee Sensitivity

Gender also plays a role in financial tendencies, with more men than women willing to pay fees on investment accounts. For example, half of the male respondents would accept fees for workplace retirement accounts, whereas 46% of women would. However, women are slightly more inclined to accept fees for checking accounts. On average, men are willing to tolerate higher monthly fees across different financial accounts.

The Bottom Line

In conclusion, many Americans may be misjudging what is reasonable to pay in bank fees while potentially underestimating investing costs. Utilizing tools from NerdWallet can help determine the true costs involved with investment accounts. Ultimately, if your current bank's fees are holding you back, consider exploring other options—there are better alternatives out there for your hard-earned money.