There are lots of reasons to change banks. Maybe you’re moving out of your bank’s coverage area. Maybe you need a bigger branch network. Maybe the fees or too high or the interest rates are too low, or the customer service isn’t up to standard. It’s not difficult to switch to a new bank, but you will need to be systematic and make sure you’ve cleaned up all the loose ends.
Why Switch Banks?
It’s important to be clear on why you want to change banks. Those reasons will help you select a new bank that will fit you better.
These are some of the most common reasons why customers look for a new bank:
- You want better customer service. If you’ve had bad experiences with your bank’s service, you may be fed up enough to look for another bank.
- You need better online or other technology tools. Some banks are well ahead of others in exploiting the latest technology. If online banking is important you may look for a bank with a better range of tools.
- You want fewer or lower fees. Bank fees can be a significant cost. If you think your bank’s fees are too high and too numerous you may decide to switch.
- You want a wider range of financial products. As your financial life grows more sophisticated you may want or need products or services that your current bank doesn’t offer.
- You’re moving outside your bank’s coverage area. If your bank is local and you’re moving out of the area, you’ll need a new bank.
- You need more ATM and branch locations. If you’re moving around more and need access to ATMs or branches in other locations, you may need a new bank.
These factors will have a lot to do with your search for a new bank. If you want better service, you might want to look at a local credit union. If you’re looking for a wider product range or better online services a local branch of a national bank might serve you better.
Find Your New Bank
You may already know what bank you want to use. If you haven’t made a choice, you’ll need to make a list of your priorities and do some careful research before making a decision. These are some factors to consider:
- Minimum balance and initial deposit requirements. Most banks have quite reasonable requirements, but some may require thousands of dollars to open and maintain an account.
- Fees. Banks rely heavily on fees to generate income and they can put a real dent in your cash flow. Ask when fees are imposed and how large they are. Be sure to compare with other banks.
- ATM access. Most people use ATMs to get access to their money. You should think about where you might need access and make sure the bank you’re considering has ATMs in the right locations.
- Protection. Banks should be insured by the Federal Deposit Insurance Corporation (FDIC). Credit Unions should be insured by the National Credit Union Administration (NCUA) or an equivalent state agency.
- Interest on deposits and loans. If all you want is a checking account, you might not care much about interest rates: most checking accounts pay little or no interest. If you’re considering a savings account, money market account or certificate of deposit, you should compare interest rates. If you may want to borrow soon you might want to check the rates the bank charges on loans.
- Online banking tools and apps. If remote banking is important to you, compare the online and mobile app tools that different banks offer.
- Types of accounts offered. Again, if all you want is a basic checking account you may not be thinking about more exotic offerings. You never know how your finances will develop, though and you may find yourself shopping for additional accounts or services.
- Customer service and bank reputation. Do some research online and see how people feel about the bank you’re considering. Look into ethics complaints and legal issues. There will always be a few people complaining about any bank, but a pattern of complaints is something to consider. Think about your gut feelings also: visit the banks and see how you feel about the service you get.
You should pay attention to all of these even if they aren’t on your list of priorities. Fees may not be the reason you’re switching banks, but if your new bank has high fees, they can become a priority very quickly.
It’s important to know what you need. A person who only needs checking and saving accounts will want a different type of banking than a person who’s opening a business and needs a full range of financial support.
There are several types of banks to consider:
- Local banks. Local banks may not give you as many product or service offerings or as large a branch network as national banks, but they may provide more personal service, including direct access to decision-makers.
- Local branches of national banks will have the best online tools, the widest branch networks and the most varied service offerings. On the other hand, they may feel remote and unresponsive to the needs of small depositors.
- Credit unions make you a part-owner of your financial institution. They often offer very competitive interest rates and fees, financial education options and great service. They may not offer a wide branch or ATM network, cutting-edge technology or a wide variety of services.
- Online banks have no physical presence at all, so if you like doing business in person they might not be the option you prefer. They do offer services you may not find anywhere else. Online banks often offer better interest rates than you’re likely to find at a local bank.
Remember that you can have accounts with more than one bank. If you’re looking for higher interest on savings, for example, you could open a high-yield savings account with an online bank and keep your checking account at a local bank for better customer service.
List Your Accounts and Regular Transactions at Your Current Bank
If you’re switching banks, you’ll need to make sure that any automated payments or other recurring transactions are switched over to your new account. Review at least a quarter and ideally a year of bank statements and list any automated transactions or bank services you’ll need to transfer.
Look for these transactions or tools:
- Direct Deposits
- Automatic Bill Payments or Subscriptions
- Recurring Transfers
- Linked Accounts
- Banking Alerts via Email or Text
- Mobile App
- Paper Checks
- Safe Deposit Box
You’ll need to resolve all of these or transfer them to your new account before closing your old account. If you have simple finances with no or few automated transactions this can be easy; if your financial life is complicated it could be more challenging.
Open Your New Account
Most banks make it easy to open a new account. You will probably need to provide your name, address, contact details, photo ID and Social Security Number.
You can make your initial deposit in cash, through a check or by transfer from your old account. Be sure to ask about the minimum deposit ahead of time.
Many banks will check your record with a bank-specific reporting system that keeps track of banking issues. Some banks may run a soft credit check, but hard inquiries are unusual unless you are applying for an overdraft facility or credit-related product. Ask if you aren’t sure.
Move Cash and Payments to Your New Bank
Moving to a new bank account is a gradual process. You want to make sure your new account is fully functioning before closing the old one.
Follow these steps:
- Leave some money in your old account. Leave enough to avoid paying a fee for being below the minimum balance and to handle any automatic payments or outstanding payments.
- Change any direct deposits. If you receive direct deposits make sure they are moved to your new account.
- Move any automatic payments to your new account. If you use automated bill payment systems, you will have to move them to your new account.
- Notify service providers. If your internet provider, cable provider, credit cards or any other services were tied to your old bank account they will have to be advised of the change and connected to your new account.
- Check for loose ends. Review your planning list and make sure you’ve covered everything on it.
Ask your new bank if they provide account switching services. Many banks will do some or all of this work for you.
You may wish to leave your old account open for a while to make sure you haven’t forgotten any scheduled transactions.
Close Your Old Account
Follow your old bank’s process for closing your accounts. You may be able to do this online, over the phone or in person. Your old bank may try to talk you out of leaving or make offers of new services, but they can’t stop you. There may be a fee to close your account.
Be sure that you empty your accounts and get a written statement indicating that the account is closed. Be sure you have all the statements your old bank has sent you on file. Request replacements if your file is incomplete. You may need these for taxes or other purposes.
Make sure that any checks paid from the old account have been negotiated before you close it. You don’t want to have bouncing checks on your record.
Some banks will reactivate an account if an automatic payment occurs. Ask your old bank about its policy and call after 30 days to confirm that your account is closed.
When you are sure that all of your business with your old bank is closed, shred all checks, debit cards and other documents with personal information.
Switching bank accounts is not a complicated process, but you have to be careful and you have to be thorough, especially if you have set up automated transactions. You don’t want to overlook transactions and miss payments or deposits because they are tied to an account that no longer exists. If you’re systematic and you follow the process carefully, you’ll soon have a trouble-free transition to a new bank.