How To Switch Banks
To move your money from one bank to another, you’ll first choose a new bank and open an account. Once you’ve transferred all your recurring deposits and withdrawals to the new account, you can move your money over and officially close the account with the old bank.
Step One: Choose a New Bank and Open Your Account
The first step towards leaving your current bank is choosing the institution where you’ll move your accounts. When choosing a new bank or credit union, consider what’s most important to you in a financial institution. Here are some questions to ask about the institutions you’re researching:
- Does the bank have physical locations near you?
- Does it offer competitive interest rates?
- Does it offer special products like high-yield savings accounts?
- Does the bank have an app for mobile banking?
- What account fees does the bank charge?
You should also ensure that federal insurance backs the financial institution you’ve chosen. The Federal Deposit Insurance Corporation (FDIC) insures banks and the National Credit Union Administration (NCUA) insures credit unions.
Once you choose the bank or credit union you’d like to switch to, you’ll need to open an account. Find out what the minimum initial deposit is and how you need to fund it — by cash, check, debit or credit card, or through a wire transfer from your other account.
When making the minimum deposit to open the account, you should also set up the account’s other features. This could include signing up for an overdraft protection plan, downloading the mobile banking app or ordering checks and a debit card for the new account.
Step Two: Update Automatic Deposits and Withdrawals
Now that you’ve set up your new account, it’s time to move over any automatic payments or deposits you have set up in the old bank account.
If you receive direct deposits from your job, first fill out the required forms to tell your employer to send your paychecks to the new account. Then take time to look through your old account’s statements and make a list of all the automatic payments you have. These might be utility bills, credit card bills or subscription services.
Go down the list and transfer each of these automatic payments over to your new account. (You should do this after you’ve received the first direct deposit in your new account to make sure you have enough funds to cover the automatic withdrawals.)
Step Three: Transfer Money to Your New Account
If you’ve moved over all the automatic deposits and withdrawals, you can now start transferring your money from your old account to your new account. You should move over most of the money in your checking account — but not all of it yet.
Leaving some money in your account is a safeguard against any automatic withdrawals you may have forgotten about. Make sure it’s enough to avoid falling below any minimum balance your bank requires for checking accounts. Otherwise, you may have to pay a maintenance fee for having too low of a balance.
It’s best practice to leave your old checking account open with some money deposited for at least one billing cycle. Doing so will help you catch any recurring transactions or accounts you forgot to update to your new bank.
Step Four: Transfer Remaining Funds and Close Account
When you’re satisfied that you’ve updated all recurring transactions to the new bank account, you’re finally ready to break up with your old bank.
To close the account, you’ll probably have to go to the bank in person, call a customer service line or submit a written request. When you speak to a bank employee on the phone or in person, be sure to have the account number and routing number of your new bank account with you so the former bank can arrange for the remaining funds to be transferred to your new account.
You should also request a written confirmation that your account has been closed. Institutions will sometimes reactivate closed accounts if an automated bill payment or billing error attempts to withdraw money from the account. Having a written acknowledgment that the account is closed can help you settle any issues that may arise.
Should I Switch Banks?
Now you know how to switch to a new bank or credit union, but how do you know if that’s the right decision? A recent study found that these are some of the most common reasons customers decide to switch banks:
- Protection of customer data
- Prices and fees
- Online and mobile banking capabilities
- Value for your money
- Convenience of branch location
- Customer service experience
If you have concerns about your financial data being protected or feel that you’re paying too much in fees, it may be time to switch banks. You may also want to switch if your bank doesn’t have branches near you, or if they don’t offer the convenience of online and mobile banking.
You might simply want a bank or credit union that gives you more value for your money. Shopping around for competitive interest rates and low fees can have a significant positive impact on your personal finances.
Frequently Asked Questions About Switching Banks
7 Cited Research Articles
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- Altra Federal Credit Union. (n.d.). Checking Switch Kit. Retrieved from https://www.altra.org/personal/checking/checking-switch-kit
- Consumer Action. (n.d.). How To Switch Banks. Retrieved from https://www.consumer-action.org/downloads/alerts/Switching_Banks.pdf
- Consumer Financial Protection Bureau. (2016, March 18). What Is the Best Way To Move My Checking Account to Another Bank or Credit Union? Retrieved from https://www.consumerfinance.gov/ask-cfpb/what-is-the-best-way-to-move-my-checking-account-to-another-bank-or-credit-union-en-985/
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