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What Happens When a Bigger Bank Swallows Up My Bank?

A bank merger may or may not affect customer bank accounts. Banks will provide their customers with guidance on next steps after a merger of banks.

March 30, 2022

When we join a bank or credit union, we typically expect to use that bank for the long term. But what happens if your bank is acquired by another financial institution? Should you stay with the bank or switch? And what might happen to your account? 

Bank mergers and acquisitions are common these days. First Citizens Bank recently merged with CIT Group to create the 19th largest bank in the U.S. by assets. SunTrust Bank and BB&T merged in 2019 to create Truist, now the sixth-largest bank in the nation. 

The pace of bank mergers has been accelerating in recent years. Big banks are swallowing up smaller banks, while mid-sized banks are merging to stay competitive with larger financial institutions. 

What does a merger of banks mean for customers? And what should you do if your bank is acquired or merges with another bank? 

Why do bank mergers happen?

Banks often merge for one of the following reasons:

Expanding into new markets 

Many banks start out as regional banks serving only a specific area. Merging allows for rapid expansion into new markets. A bank with a presence on the West Coast may merge with a bank in the Southwest, for example.

Expanding service offerings

Most banks offer the standard services: Loans, checking accounts, mortgages, etc. But sometimes, a bank will merge with another to expand into a related service, such as investment banking or wealth management

Cutting costs 

Banks can often keep their costs down by merging with larger ones. They may lay off certain staff, or may simply use economies of scale to reduce their expenses. 

What happens when banks merge?

When financial institutions merge, there can be several broad outcomes:

  • The banks could stay as separate entities but merge under a single ownership structure. In this case, very little would change for bank customers.

  • One bank could “absorb” the other, which results in the smaller bank changing names, operational procedures and potentially, account numbers. In this case, customers may need to take action.

  • Banks could merge into a new financial institution with a new name, new account numbers and new operational procedures. In this case, customers will likely need to take action. 

In any case, the important things will stay the same:

  • Your money will be safe

  • Any certificates of deposit that you have will remain valid with the same original terms

  • Any fixed-rate mortgages or loans you have will remain the same with the same terms

  • Your account balances will still be FDIC-insured for up to $250,000 per account

A quick note on FDIC insurance: Be aware that insurance is only for up to $250,000 per depositor, per bank. If you have accounts at two different banks and those banks merge, double-check that you are still under the (combined) $250,000 FDIC insurance limit.

What to expect from your bank

Be on the lookout for a letter or digital notice from your bank or from the bank that’s acquiring/merging with your existing bank. 

This letter should explain any steps you’ll need to take. It’ll also list contact information for the bank to resolve any questions you might have. 

Here are some common changes that may occur when your bank merges:

New account numbers

Your account may be assigned a new account and/or routing number. If this happens, you will need to update your information with your employer (if you’re paid via direct deposit), with your credit card company and with any other service that uses your bank account/routing number. 

New debit card

You’ll also likely receive a new debit card in the mail and can dispose of your old one. You may need to set a new PIN. You’ll also need to update your billing information with any merchant that you use the debit card for, including any recurring monthly bills. 

Bank branch changes

The new combined bank may close some existing branches or they may open new ones. You may see your existing branch rebranded to a new name. Banks usually keep the same staff at existing branches, but there may be some personnel changes. 

Savings account interest rate changes

If you have an interest-bearing account at your bank, such as a savings account, you’ll want to check if the interest rate is changing. 

Fee structure changes

Finally, keep an eye out for changes to the fees that your bank charges. There may be new fees to watch out for, such as account maintenance fees or overdraft fees

Note that there’s usually a grace period before these changes take effect. You may be able to keep using your existing debit card and account number for several months after the merge — but check with your bank to be sure. 

Finally, ask questions if you are confused about anything. The bank will likely have a dedicated team set up to field questions about the merger. 

Should you find a new bank?

Having your bank merge with another bank can be frustrating. 

In most cases, it won’t be necessary to switch banks. The new, combined bank should provide a similar level of service, features and costs. 

Sometimes, mergers do result in negative outcomes for customers. Research has found that bank mergers may result in:

If you aren’t happy with the changes taking place, it’s wise to consider your options. You might consider switching to a credit union, or opening a high-yield savings account at a different bank. 

Watch for the changes that take place with your bank. If they raise fees, for instance, it may be time to shop around. 

If they raise your credit card APR, it may be wise to look into credit card debt consolidation. Tally† may also be able to help. Tally offers a lower-interest line of credit to help pay off your credit card debt.

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.