There are many reasons to switch banks. Perhaps your new bank is in a better location, has fewer fees, offers higher interest rates on savings accounts or has friendlier customer service.
But after you’ve made the decision to switch, the actual process of transferring funds from one account to another is more complex than simply hitting a button.
“Once you’ve chosen the right bank, the switch has to be done intentionally because there’s a lot of things that can go wrong,” says Jason Reposa, CEO and co-founder of MyBankTracker, a resource for consumers making banking and financial decisions.
Here’s how to switch banks.
Open the New Account
The first step to switching banks is to open an account at your new banking institution. At many banks, this process can be completed online by filling out a form with your name, address, contact information, driver’s license number, employment details and other information. You’ll subsequently get your new bank account information and a new debit card for your checking account.
You’ll also need to make an initial deposit into the new account, experts say. “I’m in favor of transferring enough that will cover rent and bills for a month,” Reposa says. “So, you know you’re covered for that month.”
Look at whether your new bank offers a “switch kit.” That’s a resource some financial institutions make available to help you transfer your money and sever ties with your old bank. To find one, do an online search for your bank’s name and the term “switch kit” or ask a customer service representative.
If you’re opening a standalone savings account, this step, plus closing your old savings account, might be all you have to do. With a checking account, however, switching banks can be more complicated.
Take Inventory of Automatic Bill Pay and Outstanding Checks
Pore over your bank records, noting regular bills and expenses that are automatically deducted through your bank’s bill-pay service or via an individual company’s payment tools. Don’t forget to look for monthly mortgage payments or rent checks, your electricity bill, water bill, gas bill, gym membership fees, credit card payments, beer-of-the-month club dues and whatever else you regularly have automatically deducted from your account.
Don’t only review a single month’s worth of expenses, experts say. Also take note of any quarterly, annual or semiannual bills that automatically ping your account. For example, you may have insurance payments, sewage fees, health care expenses and other funds that are automatically withdrawn less frequently. Looking at a full year’s worth of expenses is intense – but it should help you catch everything.
One last check experts recommend: “Make sure you don’t have any outstanding checks that haven’t cleared,” says Greg McBride, chief financial analyst at Bankrate.com.
Redirect Automatic Payments to Your New Bank
As you review your regular expenses, start to redirect automatic payments to your new bank account. How you switch them over will depend on whether you previously funded your bills through the automatic bill-pay system at your old bank or through the individual company’s bill-pay tools. You’ll want to make sure each bill is set for payment from the new account, and keep an eye on your regular bills throughout the first few months of the switch.
Redirect Direct Deposits to the New Bank
Remember to redirect any automatic deposits, such as your paycheck, to the new account. You’ll likely to have to fill out a form with your employer to complete this step. Take note: It may take a month or two for this new system to take effect. “Direct deposit may not switch over instantly,” McBride says.
Link Savings to Checking Account
When setting up your new account, opt to link your checking and savings accounts, McBride says. That way, you can set up automatic transfers between the two accounts in order to fully fund an emergency fund, save for a vacation and accomplish other savings goals. Connecting these accounts can also save your hide when you accidentally overdraw your checking account, McBride says, because many banks allow you to pull from your savings to fund your checking account if you inadvertently overspend.
Keep Both Accounts Open
It might take a month or two for new deposits and bill payments to link with the new bank account, experts say. So keep both accounts funded for at least two months. “Take advantage of letting them run in parallel for a little while to make sure payments you’ve transferred over are coming from the right account,” McBride says.
Keep in mind that you may have to continue paying any monthly service fees or low-balance fees while you juggle two accounts.
Close the Old Checking or Savings Account
Once you’ve gone through the process of transferring automatic payments and deposits, it’s time to officially bid adieu to your old bank account.
Depending on the bank, you may need to jump through some hoops to close your old account. “Closing could be tricky,” Reposa says. “Just like any [company] that has a retention department, they don’t want to lose you.” You may have to send an official letter requesting account closure and submit certain proof of identification. So make sure to understand the process involved and follow the steps. If a brick-and-mortar location is close by, it might be worth heading over to make sure you’ve met every requirement. Beware: Some banks may charge a fee for closing. You’ll also want to cut up or shred any debit cards or checks associated with your former banking institution.
“Get written proof and make sure it’s closed,” Reposa says. “Many [banks] are good in sending it, but ask.” Once your confirmation is in, congratulations! You’ve officially switched banks.