Customers may want to change banks for a myriad of reasons. These can include changes in a bank’s fee schedule, moving to a new area that doesn’t have as many or any locations of their current bank, trying to get a higher interest rate with a new institution, trying to open a joint account and more. Because bank accounts nowadays are linked to so many online payment accounts or direct deposits, it is important to keep track of all the linked components and switch them to the new account accordingly. This guide will take you through all the necessary steps and considerations for switching banks.
Summary of the Steps Needed to Switch Banks:
|Step||Biggest considerations to make|
|1) Find a new bank & Open a new account||Do you want a big national bank for when you travel? Or perhaps a local credit union. Compare rates at these institutions to find what suits you best. Be prepared to have any and all information necessary to open a new account. This commonly involves some government-issued ID, proof of address, and your social security number.|
|2) Transfer activity||Do you have direct deposits, automatic withdrawals or auto pay on bills set up to your old account? Be sure to switch them over to your new bank account.|
|3) Transfer funds||A certified check may be cheaper, but will generally take longer than moving your funds over via wire transfer|
|4) Close the old account||Submit an official account closing letter and shred old bank checks and debit cards|
The above summary is just the brief overview. If you are interested in learning more, read on for more details on how to switch banks.
How to Switch Banks: Easy Step-by-Step Instructions
Follow these steps to easily switch banks, whether you’re just looking for better rates or are moving to a new city.
Step 1: Find a New Bank and Open a New Account
When switching banks, consider a wide range of options. If you haven't done so already, you should look into national banks, local banks, online banks, or credit unions for your new institution. Compare the different account offerings, fee schedules and interest rates to determine a bank that would best suit your needs. If you need help deciding, you can find out more through our in-depth guide on "How to Choose a Bank".
When opening a bank account, you can do this either in person or online. If you go in person, be sure to bring in valid photo ID and be able to give a name, address, date of birth, and social security number when asked. If you open the account online, you simply need to type all this information into the online forms. You must be over 18 in order to apply for a bank account online. As a minor applying for a bank account, you must go into the branch in person and have a parent or guardian accompany you. If you are applying for a joint account in person, you should both go into the bank together when submitting the application. If you are applying for the joint account online, be sure to have all personal information of the other party on hand. Keep in mind, you will need to deposit money into your new account. You will also need to deposit money into your new account. The next section goes over how you can fulfill this by simply moving over the funds you had deposited with your old bank.
Step 2: Transfer the Rest of Your Funds
You have several options when it comes to moving funds from your old bank to a new one -- most of these differ by speed and cost. It will generally be cheaper to use an electronic payment or certified check. However, it may take a few days before you are able to access the funds. Wire transfers will move your money to the new account immediately but you will need to pay the associated fees for this type of transaction. The average cost of a domestic wire transfer is around $42, when you combine incoming and outgoing costs.
You should leave some money in your old account if you have any automatic payments that will soon try to withdraw money from it. This will prevent your old account into going into a negative balance, and causing you additional trouble after you moved on.
Step 3: Transfer Activity From the Old Bank to the New Bank
To keep track of all the linked components to your old bank account, make a list of all the automatic deposits and withdrawals that are scheduled to enter and leave your old bank account every month. This includes any bills that are authorized to be paid from your checking account or savings account, such as any utility or credit card bills. Update all your credit card, phone, cable and other bills with your new bank account. You will also need to update any linked online accounts such as PayPal and Venmo with this new information as well. If you sign up for services that automatically charge your debit card each month, such as Netflix, make sure these have all your new information as well.
When switching direct deposits, you will need to present your employer a canceled check from the new account. This transition may sometimes take a few billing periods before it is fully implemented. Find out the exact date in which the direct deposits transfer and have the automatic withdrawals from the new account begin after the direct deposits clear. When switching the accounts in which your automatic withdrawals are drawn from, you will need to fill out more paperwork explicitly specifying which account the withdrawal is originally coming from and which account you would like to transfer this transaction to. Like direct deposits, this may take a couple billing cycles before it is fully implemented as well.
Step 4: Close Your Old Accounts
Once you are certain that all outstanding checks from your account have cleared, all direct deposits, automatic payments, and withdrawals have switched over to your new account, emptied your safe deposit box if you have one, you can close your old account. To do so, you will need to submit an account closing letter to officially declare the account is closed. This ensures that a bank will not have an excuse to reopen the account and bill you late fees, overdraft fees, and other charges if for instance, a check comes through. Finally, it is also a good idea to shred any blank checks and debit cards from your old account. This will prevent someone from stealing them and using them fraudulently in the future.
Additional Things to Consider when Switching Banks
When switching banks, it may take a couple billing periods before all your automatic withdrawals and direct deposits officially switch over to the new account. Therefore, it's crucial that you do not close your old account right away. By waiting, you can still pay some bills from the old account in the event that it takes a little longer than normal for all your linked bills to transfer. This will also prevent you from being penalized and building up debt, potentially affecting your credit score. Some people will temporarily opt to receive paper statements instead while they are in the midst of changing bank accounts to prevent double charges and other mix ups. Switching banks may be a bit of a hassle, but as long as you remain organized throughout the process, the transition should be fairly straightforward.
Common Questions People Have About Switching Bank Accounts
How do I switch banks when moving out of state?
|The process works the same way. Your out-of-state driver's license should be accepted at proof of ID in your new state, so you shouldn't have trouble opening a new account. The most trouble you might have is establishing proof of address. However, this can typically be as simple as having the bank mail a letter to your new home.|
Does closing an old bank account affect my credit score?
|No. Your checking and savings accounts do not have an effect on your credit score. If you had a credit card account with your old bank, and you close it, that will likely have a negative effect on your score.|