Love them or hate them, there’s no escaping the fact that you need a bank to keep your money safe. But if your current bank isn’t cutting it, you may be wondering how to switch banks and if switching to a new one is more trouble than it’s worth.
If you’re looking to change banks but aren’t sure where to start, this step-by-step guide will set you in the right direction.
What to Consider Before Switching Banks
Before you do anything with your current bank account, you’ll need to choose a new bank. Here are some things to consider.
Bank or Credit Union?
The first decision you’ll need to make: credit union vs. bank.
The main difference between the two is how they are run. Banks are designed to make a profit by investing their money and growing their business. Credit unions are owned by members, who receive dividends on annual profits. Each have their pros and cons.
Online or Traditional?
Many credit unions are local organizations, so you’re likely to have an ATM close by you.
Banks can be trickier. Local banks and larger national banks may have physical branches in your area so you can stop by and speak with someone in person with any questions or issues. But if you choose a bank without a physical branch near you or an online bank that doesn’t have brick-and-mortar locations, you’ll need to ask your questions online or over the phone. That can be stressful if customer service isn’t up to scratch.
You could also end up paying ATM fees if your bank doesn’t have a location near you, but many online banks will reimburse these fees.
Perks and Benefits
When you choose a bank, consider how much interest your money will earn, as well as any perks or benefits offered. You might be eligible for a cash bonus just for joining.
But you’ll also need to weigh the perks against the fees, including overdraft charges. Also be aware of any minimum balance requirements.
You might find a bank or credit union that looks perfect for you, but what do current customers think? Look for reviews online and ask your friends or family members to share their experiences. You might be put off by bad reviews and continue your search, or you might find good reviews of your chosen bank that put your mind at ease.
How to Switch Banks in 5 Steps
Ready to say goodbye to your bank? Here’s how to switch banks in five easy steps.
1. Open Your New Account
Once you’ve decided on a bank or credit union, you can start the process of opening a bank account. Whether you do this online or in person, it’s important to be prepared with the right documents, including a photo ID.
You’ll want to open your new account at least a few weeks before you want to make the official switch. This will ensure that your bills will be paid and you won’t be hit with late or overdraft fees.
2. Redirect Automatic Payments
You probably have a lot of your bills set up to autopay from your bank account. It’s vital that you switch these automatic payments to your new account as soon as possible to avoid missing payments.
Make a list of all the automatic payments you have. This might include, but isn’t limited to, the following:
- Mortgage or rent
- Car payment
- Student loan payments
- Credit card payments or other loans
- Utilities, including gas, electric and water
- TV provider, including cable, satellite and streaming services
- Car insurance
- Cell phone bill
- Gym or other club memberships
- Charitable donations
Check previous bank statements to make sure you have all automatic payments listed. Once you have your list, start switching over your autopay information. It’s a good idea to ask for an email receipt for confirmation.
Go back through 12 full months of bank statements to make sure you don’t miss automatic payments that you only make quarterly or annually.
3. Contact Your Employer
Many employers, especially larger ones, pay via direct debit. Contact your employer ASAP to let them know your new account details to avoid a paycheck delay.
Your employer may require you to fill out a form with the new information or provide a voided check. Make sure you ask exactly what they need from you to ensure the switch goes smoothly.
If you have more than one employer or receive other direct deposits, such as child support payments, make sure you update that information as well.
4. Transfer Your Money
Once you’re sure your automatic bill payments and direct deposits are up to date, move any remaining money from your old checking and savings accounts to your new ones.
Depending on your bank, you may be able to transfer the money to your new account free of charge. If you’re faced with a fee for the privilege of moving your money, you can request a check from your old bank that you can deposit into your new account.
5. Close Your Old Account
Once your new account is set up and established, it’s time to close your old account. Wait a month or two to make sure all direct deposits and automatic payments are set up properly with your new bank before closing your old one. The last thing you want is to have your water cut off for non-payment when you thought you’d switched that bill over.
Make sure you’ve paid off any outstanding balances on your old accounts before moving funds. Failing to do so could make it harder to open bank accounts in the future.
No matter why you’re switching banks, it’s important that you feel confident in your decision. Follow these steps to ensure an easy transition between your old and new banks.
Catherine Hiles is a writer, mother, runner and avid reader. She enjoys cooking (and eating), good beer and spending time with her husband and two young children.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.