I have been banking with the same institution for 18 years. That
means I get a little panicked at the thought of switching to a different
bank. Between direct deposits and automatic bill paying, the task of
changing to a new bank feels long, complicated, and potentially messy.
It doesn’t have to be that way though. Opening up a new bank account
and switching institutions is actually pretty simple. While changing
banks is a bit different in today’s digital age, you can still make the
switch without feeling overwhelmed. At least updating payment details is
much easier now that everything is online. Here’s a step-by-step guide
to switching your bank, without tearing your hair out.
Choose Your New Bank Account Wisely
This is especially important if you’re leaving your old bank for a
particular reason. It could be increased fees, a bad experience, or some
other service changes that you don’t like. However, a lot of majors
banks are similar to each other. So make sure to research your potential
new bank thoroughly.
How’s the reputation of the bank? Are there any branches close by?
Is there a specific feature you are looking for? Can you get free ATM
withdrawals? What is those those ATMs are out of network? For example,
Charles Schwab Bank reimburses its customers for out-of-network ATM
fees. If you go with them, you may save quite a bit of money. On the
other hand, they don’t really have many physical branches. If you’re the
kind of person to likes to bank in person, they might not be what
you’re looking for.
Bank of America also reimburses a portion of out-of-network ATM fees.
Unfortunately, you have to qualify for the benefit by having at least
six figures worth of assets held at the institution. However, some
people I know qualify by having money in their Merrill Edge investment
account. At least you won’t have to keep a ton of money in your checking
or savings account to qualify. Still, having six figures in liquid
assets (even in investments) isn’t something that everybody can manage.
That’s why it’s important to research your banking before you make the
switch.
Open Your New Account Before Closing Your Old One
You will need to have a little overlap time between your multiple bank accounts.
After all, you want to be sure that all of your transactions will
clear. Closing your old account without a new one in place could cause
an issue. You might default on a payment or have a deposit placed in a
defunct account. It’s also a good idea to leave some cushion in your old
account in case you forget to cancel an automatic payment.
When you open your new bank account, don’t forget to bring the
following items with you: photo identification (driver’s license or
passport), your Social Security number, and an opening deposit amount.
Make sure you have enough money for your initial deposit to meet the
bank’s minimum so you won’t have to pay a monthly fee to keep your
account. If you can’t, then you should probably look for another bank
that doesn’t charge you a fee.
Make Sure To Transfer Your Automated Payments
This can be the tough part. You might not remember each and every
service provider that you make automatic payments with. It’s very easy
to miss something.
Before you switch, make a list of all the various service providers
that you pay automatically. Then, hop online and search the previous
three months’ worth of transactions in your old bank account to make
sure you haven’t missed anything. This will help you round up all the
services that you might pay for quarterly. Once you have your list,
cancel any scheduled bill payments for all of your service providers.
If you pay quarterly estimated taxes, note that your account at EFTPS.gov
is tied to your bank account. You will have to reapply for a new
account once you have your new banking information. You should also
check with your state when it comes to taxes. See if you can simply
update your banking information or if you need to reapply for a new
account with them as well.
It’s also a good idea to plan on paying your bills manually (whether
by mail or online) for a month or two. The last thing you want is a ding
on your credit score because some bill payment was missed in the
shuffle. Once you know everything has transferred over to your new
account properly, you can put those bills back on autopilot.
Finally, don’t forget to talk to your HR department at work. Assuming
you get paid via direct deposit, they will need your new banking
information too. They should be able to tell you how long it will take
for the switch to take effect. This is another important reason to keep
your old account until you’re sure your hard earned dollars are arriving
in the right place.
Wait Before Closing Your Old Account
It’s likely that there may be some snags as you are making this
transfer from one account to another. Therefore, it’s smart to keep your
old account open (and at least partially funded) for a couple months in
order to cover any mistakes.
For example, the Federal government is overloaded with requests right
now. Perhaps it’s already time to file the next quarter’s estimated
taxes. If you’re not all set-up with your new banking information yet,
the taxes are still due. In this case, you’ll be happy you can just use
your old account to keep Uncle Same happy.
When you do finally close out your account, do it in person. Make
sure you request proof of the closure to keep for your records. This
will help if there’s ever a dispute over the old account in the future.
Personally, I would electronically transfer any remaining funds to the
new bank first. However, you can also request it in cash or as a
cashier’s check.
Finally, make sure you shred any unused checks and debit cards
associated with that account. Don’t give any shady character a chance to
attempt fraud on your behalf.
The Bottom Line
Transferring to a new bank may be a bit of a chore. However, it
doesn’t have to be expensive or stressful. If your bank is charging you a
bunch of fees, it’s probably time to start shopping for an alternative.
Remember that banks are always competing for your business. Many of
them offer signup bonuses
when you meet certain conditions. We’ve seen offers of free cash or
tech gadgets just for switching banks. If you’re trying to nab one of
those promotions, make sure you read the fine print on exactly how to
qualify for the freebies.
With banking being such a competitive business, most major banks will
happily guide you through the process of switching. Many will do as
much as the required legwork as possible. Sometimes that includes
closing your old account for you. In the end, though, it’s up to you to
make sure all your information is accurate and up to date. Make sure to
do your part so that the transition is as seamless as possible.
