Editorial Team

Here's Why People Are So Reluctant To Change Banks

The average length of time we spend with our primary bank is 16 years; that's longer than most people stay married.

It's an incredible length of time to remain so loyal to a brand. And yet, 80% of all deposits are held by just a handful of the largest Big Brand Banks. So, what’s keeping people devoted to their financial ball-and-chains? 

It’s not returns on money — the biggest banks offer the worst value for money. And it’s certainly not customer service — in a list of the 15 worst banks in America based on customer complaints, the Big Brand Banks dominate. 


When people do move it's often because something else changed in their life, e.g. they moved city or country, they got married or divorced, or their job status changed.

Unfortunately, the Big Brand Banks know how hard it is to get ourselves to switch banks and they take advantage of that tendency towards stasis. In a report on American’s secret financial lives, Nonfiction Research quoted a bank executive saying, “You have to torture people pretty hard before they leave a bank.”



Why do we choose a bank in the first place?

The most common reason for choosing your first bank is because your parents told you to.

"Parental influence is particularly strong for those making their first banking decisions, with almost three in five (59%) 18 to 24-year-olds banking where their parents do," a report by the Payments Council found.

If your parents helped choose your bank at 18, there is a high probability that you will still be with the same bank 16 years later! How many other decisions your parents made for you are likely to be sticking with by your mid-30s? Banking is clearly an outlier.

Once we have made the decision a number of psychological biases create significant psychological barriers to moving.

Here are the top 4 reasons you won’t change your bank even though it’s in your best interest to do so:

  1. The Bandwagon Effect: choosing or staying with a choice because other people you know do the same.  

The Bandwagon Effect prevents us from thinking critically about our choices and builds a barrier of inertia, e.g. staying with Chase Sapphire Reserve because everyone you know has it and they can’t all be wrong, can they?

  1. Choice Supportive Effect: we made a decision and will defend it no matter what.

We will jump through mental hoops to avoid the feelings of buyer’s remorse. That means that even if the original reason for choosing a bank has been removed (e.g. that local branch/ATM closed or you moved away or you hardly ever use cash anymore), we will still end up defending ourselves and the choices we made, however irrational.

  1. The Ostrich Effect: ignoring information that causes us pain

Imagine being 30 and being told that though you’ve lost the equivalent of $1m in retirement by poorly managing your money, there is still time to change and benefit from the power of compound growth, dollar cost averaging, and more. Imagine being told the same thing at aged 50, with a much shorter runway to catch up. The second conversation is a far more painful message — truly taking it in means admitting that you lost out on an opportunity. This is one of the reasons why Millennials are more likely to change the way they bank than Boomers.

  1. The Status Quo Effect: we don’t like and actively resist change

Here are some examples of this phenomenon from Money Crashers.

  • You stick with a name-brand product you’ve been using for years, even though a private label brand would be cheaper and just as good.
  • You keep an expensive cell phone plan that you’re used to, rather than switch to a cheaper cell phone plan for less than half the price.
  • You hold on to a pricey cable subscription that you almost never use, instead of switching to a cheaper streaming service.
  • You keep the same investments in your 401k that you had when you first set up the plan, even if your financial situation has changed.
  • You leave money sitting in a savings account earning next to no interest, rather than get started investing in stocks.

How To Actually Change

We are all guilty of all or most of these. Even when we fix them, they creep back into our lives. It's very difficult to beat our own psychology. The best we can do is to ensure that we have strategies in place to keep us doing the right things most of the time for as long as we can.

In finance, the best tool you have is technology. These psychological hurdles mean that automating the behaviors that build wealth is the most powerful way to build wealth. But the first and most essential move is one you’ll have to do on your own: change your bank today.

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*Important information and disclaimers

The above does NOT constitute an offer, solicitation of an offer, nor advice to buy or sell specific securities. The opinions listed above are not the opinions of Unifimoney Inc. or Unifimoney RIA, Inc. but represent the opinions of independent contributors. These contributors may or may not hold positions in the stocks discussed. Investors should always independently research any stocks listed and form their own opinions, while recognizing that any investments made may lose value, are not bank guaranteed and are not FDIC insured.