> It also happens to be an incredibly sticky product. Think of the last time you saw an overdraft charge on your statement and swore to yourself that this was the last straw — you are taking your business elsewhere only to be confronted with the downstream effects of moving your “financial address” — telling HR where to send the next paycheck, calling up each utility company, changing autopay for each credit card bill and so forth!
Here's the thing. The stickiness of a bank is only a mental illusion. If you actually rationally calculate the time it takes to switch a bank, it's not that bad. Changing where the next paycheck is deposited takes five minutes. Changing where each credit card autopay draws money from takes five minutes. Once you have resolved to leave a bank, it probably takes about an hour to actually do it. (And for typical Americans that one overdraft fee is well more than an hour's worth of salary.)
I find this interesting because it illustrates the difference between the mental workload and the actual workload can be great. Coming up with a checklist of a dozen places to change the routing and account number seems overwhelming. It is actually not.
In the UK we have the "Switch Guarantee"[1]. It was setup when there was stickiness in current accounts (English term for checking accounts). Now when you sign up for a current account you can opt-in to this service and they do payment redirection. So if someone tries to transfer your old account money, it'll get forwarded onto your new bank. That's on top of them organising the migration of payments.
I switched from Chase to SoFi a few months back (kept my Chase CCs). Totally worth it. Didn't take that much time, although still more than an hour, plus had to be careful not to pull money out of Chase just before a payment was processed. But it's been great. SoFi Money currently yields 1.6% (not the best, but still better than any CDs or savings accounts Chase could give me). Having a high interest yielding checking account has allowed me to better optimize my investing/saving habits. Plus, when I traveled to Europe recently, SoFi was giving me the spot exchange rate at ATMs.
Yes, but it’s an hour of painfully boring work that demands care and correctness. And at the end of it, you’re just with another bank that may or may not be better.
Here's the thing. The stickiness of a bank is only a mental illusion. If you actually rationally calculate the time it takes to switch a bank, it's not that bad. Changing where the next paycheck is deposited takes five minutes. Changing where each credit card autopay draws money from takes five minutes. Once you have resolved to leave a bank, it probably takes about an hour to actually do it. (And for typical Americans that one overdraft fee is well more than an hour's worth of salary.)
I find this interesting because it illustrates the difference between the mental workload and the actual workload can be great. Coming up with a checklist of a dozen places to change the routing and account number seems overwhelming. It is actually not.