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How to switch banks
Key takeaways
- People may switch banks for lower fees, higher interest rates, better convenience, improved customer service, or enhanced products
- Successfully switching requires assessing needs, comparing options, opening new accounts, and carefully transferring all automated transactions
- Leave old accounts open until all direct deposits and automatic payments transfer completely to avoid overdrafts
Even if you've been with your bank for years, there may come a time when you're ready to switch to a new bank. Maybe you've moved or perhaps you're looking for better service. The reasons may vary, but there are certain steps to follow that may help things go smoothly when you decide to change banks.
This guide on how to switch banks will lay out the process for transferring to a new bank and answer some of the important questions you may have.
Why switch banks?
Moving to a location where their bank doesn't operate is a common reason people switch banks. Other leading reasons relate to the policies and services of different banks.
Here are some typical factors that can lead people to switch bank accounts:
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Account fees. If someone is burdened by monthly checking account maintenance fees, overdraft charges, and other fees, they may be interested in switching banks. In addition to finding a bank that has fewer and lower account fees, they might also look for one that will waive fees if a minimum balance is kept and features like overdraft protection
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Higher interest rates. One bank may offer a higher APY (annual percentage yield) on its savings accounts, as well as other ways to save
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Convenience. A person who likes walking into a bank branch and talking to a real person might prefer a bank close to where they live or work. Customers may also appreciate branches with convenient hours and surcharge-free ATMs
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Customer service. Better customer service at bank branches, online, or on phone calls could be a key consideration for switching banks
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Better products and services. An easier-to-navigate mobile app with more security features, on-site financial advisors, and extensive loan services for mortgages and cars are other key reasons for switching banks. A business owner may also be looking for business banking services and expertise
Successfully switch banks
Banks want your business, so they make it easy to switch. However, it's important to do it carefully so you don't end up with problems like missing direct deposits, untimely automatic payments, overdrafts, or using the wrong debit card.
Here's a good roadmap for the process :
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Assess your needs. Start with what you're looking for in a new bank. If you want convenience, explore banks with branches and ATMs near your home or work location. Other needs can include friendlier customer service, convenient hours, good rates for buying a home or car or saving for college or retirement, and simply rates to earn more on your money
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Compare banks. When you've narrowed down your choices based on your needs, start looking at the details, such as interest rates, types of available bank accounts, and fee structures. Also consider the bank's reputation and reviews from customers. Many banks offer a bonus to new customers for certain accounts. Weigh all these factors and base your decision on which ones mean the most to you.
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Open a new bank account. You can open accounts at a new bank online or in person by scheduling an appointment. Either way, you'll need the following information for each account holder: identity verification (driver's license or passport), Social Security number, current residential address, and other information like an email address. Additionally, some banks may require funds for initial deposits in the form of cash, check, or debit card
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Transfer direct deposits and automatic payments. You want to leave enough money in your old accounts to cover pending transactions, while transitioning direct deposits and automatic payments to your new accounts. If your old account charges a maintenance fee, you might also need to stay in compliance with the requirements for having that fee waived. You'll also need to fill out a new direct deposit authorization form at work. And to make sure you don't miss an automatic payment, print out a list of all your existing autopay subscriptions, streaming services and any other recurring payments. It may be helpful, at this point, to download the mobile app for your new bank and establish your online banking access. Notify any companies that may have your old account information on file and update peer-to-peer payment apps like Zelle and Venmo
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Transfer funds. When you're sure all pending transactions have cleared the old checking account and all direct deposits and automatic payments have been updated with your new information, move the rest of your funds to your new accounts, leaving a zero balance on your old one
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Close old accounts. Once your old account has a zero balance, you should be able to close it. You should be able to do that online, in person at a bank branch, or by phone. If possible, get written confirmation of the account closure in the form of a letter or email, or even a printed bank statement
Once you've successfully switched banks, you can then explore all the products and services your new bank has to offer, like CDs and safe deposit boxes
The benefits of switching banks
When you change bank accounts, you let go of a familiar experience to gain new benefits. Just to recap:
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Better customer service. Banks know that they need to build your trust and loyalty by offering multiple channels for assistance, including extended branch hours, phone access, and in-person service
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Better digital banking tools and mobile apps. The best online experiences focus on the customer, not the bank
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More ATM locations. Banks that partner with ATM networks offer locations at both their branches and retail locations
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Enhanced security features. Banks guard against identity theft and financial fraud by providing multiple ways to verify your identity. They also might send real-time alerts of suspicious activity
FAQs
When you switch banks, it isn't reported to the credit agencies, so it's unlikely to affect your credit score. However, if bills go unpaid because they fell through the cracks during the transition, that might impact your credit score if it's reported.
It takes very little time to open an account at a new bank, but it could take a few weeks to transition direct deposits and bill payments to the new bank account. Additionally, the process could be held up if you have pending transactions in the old bank account or a negative balance. A balance will need to be brought to zero before account closure.
After you've established your new accounts, keep the old account open long enough, and with sufficient funds, to cover any pending transactions. If the balance in your old account falls below zero, you could be subject to overdraft fees, and it will take longer to close the old account. You also want to keep the old account open until you've confirmed that direct deposits are being routed correctly. You should also pay attention to any service fees you might incur if you are signed up for features like auto pay or if you're transferring funds frequently.