To switch or not to switch?

August 21, 2012 12:55 PM

Thinking of leaving one of the larger banks for either a community bank or credit union. The problem? My only two credit cards are also through the bank I'm considering leaving. What to do?

The cards are paid off monthly, and they give me some good credit score karma, so if leaving the bank and cancelling the cards is a net negative on my credit report, I would prefer to avoid that as we plan to move and apply for a new mortgage in 2013.

So, should I proceed with the switch because it will have no impact? Or should I wait until after we move so that the big purchase is out of the way before potentially wrecking my credit score?

posted by po822000 to work & money (12 answers total)

Why not do the switch and keep the cards open? You don't have to close out everything when you close your checking/savings account. Then after the big purchase you can decided what to do with the credit cards.
posted by Grither at 12:57 PM on August 21, 2012 [1 favorite]

Are you talking about moving your checking account from a big bank to a credit union? Because you could do that, close your checking, but leave the cards as is. I personally have credit cards with several large banks that I have no other relationship with. You could always cancel them later, after you've gotten better cards through the credit union and bought the house.
posted by rabbitrabbit at 12:58 PM on August 21, 2012 [2 favorites]

Or, what Grither said.
posted by rabbitrabbit at 12:58 PM on August 21, 2012

There's absolutely no reason to close the cards if you leave your bank, unless they're spiffing you a great rate or some other rewards bump because of your total relationship with them. If a "card is a card is a card" there, don't sweat it.
posted by ersatzkat at 1:05 PM on August 21, 2012

There's nothing wrong with or unusual about what you're doing. I have my money in a credit union (where I work), and my mortgage is held by another credit union. But my credit card is actually from gap/old navy, because it has the perks I want (house full of teenagers, ridiculous discounts on clothes).
posted by headnsouth at 1:15 PM on August 21, 2012

Banks love money, they will happily let you use their credit cards without a checking or savings account with them.
posted by couchdive at 1:23 PM on August 21, 2012

I did this with Citibank last year. Closed the savings and checking, kept the credit card (although I seldom use it). No problems at all.
posted by kimdog at 1:27 PM on August 21, 2012

You won't wreck your credit score, but a new bank or credit union might pull a credit report on you as part of the process of opening a new account. One factor in your credit score is the number of inquiries that have been made recently on your reports.

You can ask, before applying, if they do this. If you are frank with them about your reason for asking, it won't raise any flags with them. They might try to talk to you about that new mortgage, though, and if they do, by all means, listen.

Credit unions are owned by the members, and you can be sure that they're more likely to be acting in your interest than any bank is likely to be.
posted by jgreco at 1:41 PM on August 21, 2012

You're right that closing old credit card accounts can mess up your credit score. It mainly affects your average account age, which is a significant part of your score. As others have said you should be able to keep the cards open even if you close any other accounts.

You won't wreck your credit score, but a new bank or credit union might pull a credit report on you as part of the process of opening a new account. One factor in your credit score is the number of inquiries that have been made recently on your reports.

This only happens when they do what's called a "hard check", which is only supposed to happen when you apply for some kind of credit or loan. Banks and credit unions will generally only do a hard check if you're signing up for something like overdraft protection which is technically considered a line of credit. Opening a normal savings account or checking account normally just involves a soft check which can happen without your involvement and therefore doesn't hurt your score. A customer service representative should be able to tell you if they do a hard check or not. Also even if you do get hit with a hard check and it knocks your credit score down by a few points, they drop off of your credit report much quicker than other items (usually after around six months) so by 2013 you should be fine anyway.
posted by burnmp3s at 2:02 PM on August 21, 2012

I'm in a similar situation. My main credit card is with a bank that I only have a credit card with. I opened a second card with my CU where I do most of my banking. I recently had a credit report done, and my score was good -- there didn't seem to be any problems with any bank/CU either. I think that's pretty normal. Banks prefer you to have lots of products with them, but it's no big deal if you don't. For a while, the CU was just a checking account for me. They don't really care.
posted by neveroddoreven at 4:15 PM on August 21, 2012

I like having a credit union account and a bank account too. I have my pay auto-deposited into a credit union to which I have no electronic access at all (they offer it, of course, I just haven't set it up). I also have a bank account (with a check card) at a bank about a block away from the credit union. I keep next to no money in the bank.

Both places are within biking distance. It's a normal Saturday chore to peddle to the credit union, withdraw just enough cash to pay bills that have come due and make any online purchases I have planned, physically carry the cash up the street to the bank and redeposit it there. Now I can e-pay bills and so on, which means I have to let my check card number out on the intertubes. If somebody grabs the number the worst they can do to me is clean out the cash I just put in, not everything I have. And the bank itself is prevented from dreaming up sudden fees and just helping itself, as it would be able to do if I had savings and checking accounts at the same place. And it's a pleasant ride.
posted by jfuller at 4:54 PM on August 21, 2012

LearnVest (a money-management site directed towards US women, if it matters) just covered this, and I thought the quiz was a little over-simplified but helpful.

How to Switch Banks
Should You Switch Banks
posted by juliplease at 6:17 PM on August 21, 2012