Everything You Need to Know About Switching Banks

FT Contributor  | 

Everyone likes to get in a routine when it comes to banking. Nevertheless, there are times when staying at the same bank can be more trouble than switching. If you move out of state, or even across town, you may find that heading to your old bank to drop off a paycheck or withdraw some cash may be more work than it’s worth.

If that’s the case, you may need to switch banks. Fortunately, the process is fairly straightforward and once you’re set up, you’ll be able to embrace a whole new banking routine that can remain relatively stable until your next move.

If you’re thinking of switching banks, here is a nifty step-by-step checklist to make sure you don’t skip anything important in the transition.

1. Identify Why You Are Switching Banks

Before you choose a new bank, it’s important to identify precisely why you’re leaving your old one. For instance, on the one hand, if it’s simply the fact that you don’t want to drive across town, all you need to do is find a bank that you like near your home.

If, on the other hand, you want to leave your old bank because you must physically visit the local branch to conduct business, you’re going to want to look for another financial institution that has an online banking option. You may also want to look for a bank with a reputable mobile app that allows you to manage your accounts and deposit checks remotely.

2. Choose the Type of Account

Along with identifying why you’re looking for a new bank, it’s also important to consider what kind of account you need to open there. A few questions to ask include:

  • Do you simply need a basic checking account to receive money and pay bills?
  • Do you need a savings account to help you save towards long-term goals and to earn interest?
  • If you need a savings account, can it be a basic one or do you need a specific one, such as a joint savings account or a certificate of deposit (CD)?
  • Do you need a unique account, such as a Swiss bank account, to provide added security and privacy?
  • Do you need a combination of some or even all of these options?

Knowing the kind of account that you need beforehand is important. It enables you to check with your potential new bank to make sure that they can accommodate your needs and that there won’t be any unique or exorbitant fees associated with the kind of account you need.

3. Choose a New Bank

Once you’ve assessed your various financial needs, it’s time to choose your new bank. Along with ensuring that a bank can give you the kind of account and accompanying features that you’re looking for, it’s also worth considering the following:

  • How close to your home or work is the closest branch of the bank located?
  • Does the new bank have a solid network of ATMs?
  • What is the financial stability of the bank in question, both currently and in the past?
  • Does the bank have a clear set of business ethics that it follows?
  • Does the bank have excessive fees or unusually high interest rates?
  • Does the bank offer incentives when you open a new account?
  • What kind of investment opportunities (CDs, IRAs, mutual funds) does the bank offer that you may want to use in the future?

As you parse through the options you have available, look for one that best fits your needs.

4. Transfer Money Into Your New Account

Once you’ve selected your bank, it’s time to open your new account. Fortunately, this is usually fairly simple. If the bank has a physical location, an associate will sit down with you and walk you through the process.

In most cases, you’ll need an initial deposit to officially open up the new account. The specific amount will vary depending on the bank you choose and the incentives available. You may be able to transfer funds from your old bank directly into your new bank. If that isn’t an option, though, be prepared to manually withdraw cash from your old financial institution in order to put your initial deposit into the new bank.

5. Redirect Your Direct Deposit

If you have your paychecks directly deposited into your old bank account, you’re going to need to redirect those funds to your new bank.

You can do this by gathering the routing number for the new bank, your new account number, and any other pieces of information that your workplace may require in order to update your direct deposit information.

6. Gather Automatic Payment Information

Once you have your income redirected into your new bank account, it’s time to redirect your expenses as well. If you have any automatic payments that pull funds directly from your old bank account, such as a credit card or utility bill, it’s important to identify these and update the payments with your new bank information.

This step is particularly important as, if you leave it unaddressed, it can lead to overdrafting on your old account, which may incur unnecessary overdraft fees.

7. Tend to Your Old Account

Initially, you’re going to want to keep your old account open. This gives you some wiggle room as you wait for the dust to settle and double-check that all of your automatic payments and deposits have successfully switched over. Even when this is confirmed, in many cases, you can still keep both accounts open if desired.

However, if you decide to shutter the old account, wait at least a month or two. Then, go over your budget one more time and ensure that you don’t have any outstanding checks or payments going in or out of your old account. Withdraw whatever money is left and deposit it in your new account — make sure everything has cleared before taking any permanent action on the old account.

Once everything is in order, you can formally shut the old account. You may be able to do this online or over the phone. If it is a joint account, you may have to close the account in person.

When this step is done, you will have selected and opened up a new account, transferred your funds, and closed your old account, successfully switching banks in the process.


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