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. At least updating payment details is much easier now that everything is online. Here’s a step-by-step guide to switching your bank.
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.
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