You might have come across the term “bank hopping” — moving your money from bank to bank to get higher interest rates or welcome bonuses that can add up to hundreds or even thousands of dollars.
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On the surface, it sounds like a way to chase higher interest rates, lower fees and more enticing rewards. But constantly moving your money between banks sounds like a lot of work. Is it worth the effort for the benefits you actually get?
That’s the question GOBankingRates reader Ronald had for our Top 100 Money Experts series. He also wondered whether the “bank hopping” approach works for other products, such as insurance. Fortunately for Ronald, we knew exactly who to consult: Taylor Kovar, CFP, founder of 11 Financial. Accustomed to guiding clients on everyday money management, Kovar says Ronald’s question doesn’t have a simple yes-or-no answer — there are a few key considerations.
Look at the Value Behind Each Offer
Kovar understands why Ronald might be tempted by bank sign-up bonuses. The siren call of “switch and save” offers is hard to resist. However, he urges readers to investigate the true value behind these deals. Specifically, consider whether the money you gain is worth the time spent hunting down old documents or dealing with fees.
“If you’re earning a $200 bonus but spending hours moving automatic payments, updating direct deposits and tracking down old statements, that money might not be worth the time or stress,” Kovar said. “I like to tell people to ask, ‘What’s the total benefit after taxes, effort and any short-term inconvenience?'”
If the savings won’t make a noticeable difference in your budget, you may be better off saving yourself the effort and staying put.
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You Risk Taking On More Fees
Kovar also warns that the biggest risks of switching banks are easy to overlook — most notably, fees. Forgotten auto payments, lost transaction histories or even a missed direct deposit because of a bank switch could trigger late fees or even harm your credit. These costs can easily outweigh the bonus earned.
“If you do decide to switch, keep both accounts open for a month or two to make sure all your payments transition smoothly,” Kovar said.
Insurance Products Are Different
Ronald asked about insurance as well, and Kovar notes that switching insurance is a little different. Shopping around for insurance every year or so is widely recommended — but it’s critical to compare the same coverage.
You don’t want to be lured to a new plan because of a lower rate only to realize that your coverage is less comprehensive, your deductibles are higher, and the claims service is lacking.
“A cheaper rate might mean higher deductibles or less protection when you really need it,” Kovar said. “Claims service also matters a lot more than price. Saving $10 a month doesn’t feel worth it when you’re stuck fighting through a bad claims experience.”
Loyalty Matters
In an age when services are delivered almost instantly and businesses compete aggressively for your attention, there is value in staying loyal to your bank or insurer. Establishing long-term relationships can sometimes offer perks that outweigh short-term savings.
“Loyalty can lead to better loan terms, easier approvals or faster service when you need help,” Kovar said. “Instead of constantly hopping around, try reviewing your accounts and policies once a year. You’ll stay on top of the best options without creating extra work or stress for yourself.”
This article is part of GOBankingRates’ Top 100 Money Experts series, where we spotlight expert answers to the biggest financial questions Americans are asking. Have a question of your own? Share it on our hub — and you’ll be entered for a chance to win $500.
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This article originally appeared on GOBankingRates.com: Here’s How To Decide If Bank Hopping for Bonuses Is Worth It
