When should I change banks?

Sunday, 26 October 2025

Many people think banks are much of a muchness, and changing bank won’t help their finances much, if at all.

Senior business reporter Rob Stock answers your money questions. Got a question for Sunday magazine? Email it to sundaymagazine@stuff.co.nz

QUESTION: When should I change banks?

ANSWER: I recall the last two times I changed bank. The first was in fury at a UK bank’s high fees, which as an inexperienced 20-something-year-old I had incurred recklessly and without attention.

The second was when I kicked off the dust of the land of my birth to come to New Zealand.

This does not make me unusual.

Consumer NZ surveying suggests that for the vast majority of people, the question ‘When should I change banks“ has little meaning. Just 3% of the people who it surveyed last year said they had changed bank. For them, the reasons, in cascading order from most common to least common were: frustration and anger at poor customer service, seeking a cheaper home loan, anger at high fees, and then the inconvenience caused by banks closing a branch.

NZ First leader Winston Peters says his party will campaign on making KiwiSaver compulsory and raising contribution to 10%, and give alongside this a corresponding tax cut.

Now, it has to be said in banks’ favour, that they are not awful. Six in 10 people were satisfied with their banks, though that may be because they have little idea of what better looks like.

The Commerce Commission, which studied switching behaviour a few years back, found there was what it called a “significant degree of inertia”.

It found only half of people had ever changed bank. You signed up to ASB when you were a child, and you never changed, for example, or you were with Postbank, but got shunted on into ANZ. In short, people move house far more than they move bank.

Why should this be? Well, for many disorganisation, and lack of interest will play a part. Others will feel trapped by their circumstances. Still more will just not be bothered. Take shifting a term deposit of $15,000 from bank A to bank B for the purpose of getting an interest rate of 0.2% more. What would that earn you? $30 before tax.

The commission felt many people felt banks were all much of a muchness, and widespread was: “The expectation that the time and effort in doing so will not be worth it.”

Now, there is the old argument of: “Look after the pennies and the pounds will take care of themselves”. This holds that success comes from doing lots of small things right, so each is worth doing, even though the immediate gain is small.

But there are other inertia factors, the commission found. The banking sector’s own switching service was not working well.

There was also the complexity factor.

Comparing power companies is easy, while people’s banking arrangements are more complex, and making comparisons harder and more time-consuming.

This is why mortgages play such a role in bank switching. Then we are talking some serious money. That 0.2% less means $1000 less in mortgage payments. In August, banks did $7.6 billion of home loans. $1.2b were actually people switching from one bank to another, presumably after a lower home loan rate.

But there’s something else going on.

I may only have “changed” banks twice, but over my life, including now, I have had multi-bank arrangements. Many are like me. Half of all people have more than one bank, the commission found. A term deposit here. A transaction account there. KiwiSaver somewhere else still.

Disclaimer: The information in this is provided for general information only and is not intended as financial advice. If you require expert advice we encourage you to seek assistance from a professional adviser.