Swapping out your accounts at an old bank for a new bank can be easy if you are prepared. Perhaps you want to save money on a new loan with a better rate or maybe your current bank doesn’t offer a specific service they need. Either way, the process of switching a bank doesn't have to be daunting if you take it step by step.
This is why we have created this easy-to-follow guide to teach you how to change banks as smoothly and efficiently as possible. Read on to learn more.
The good thing is that if you do your research and prepare early, you can make the entire process as painless as possible.
Researching New Banks
The first step to switching to a new bank is identifying which financial institution you would like to work with.
Whatever your reason for changing where you do your banking, you should fully research which institutions are best suited for your needs before making the switch.
Here are some important factors to consider when researching new financial institutions.
1. Identify your banking needs
First, what does your financial situation look like and what kind of banking services do you need? Are you looking for simple checking and savings accounts or do you want to explore additional options like mortgages, personal loans, and credit cards?
You will want to make sure your new bank has all of the services you require before moving any of your assets.
2. Evaluate various banks or credit unions
Once you have a concrete idea of your banking needs, take a look at all the different options available to you. There are many more options available now than in previous years.
In addition to your local brick-and-mortar banks and credit unions, there are plenty of online financial institutions that now offer all of the same financial services as traditional institutions.
3. Consider the bank's financial health
You may have heard in the news recently of some banks having financial difficulties and actually closing. Make sure you fully vet the financial institution you are considering to gauge their financial health and to ensure they are FDIC-insured.
4. Evaluate customer service
Last, before making the switch to a new bank, you should spend a little time online researching its customer service reputation to identify potential red flags or any patterns of mistreatment. You can easily do this by searching for online customer reviews about the institution. Customer reviews can be quite helpful when you are trying to imagine what it may look like to be a new customer at a particular bank.
Checking A New Bank's Requirements
Each type of bank, whether it is a traditional bank, credit union, or online banking institution, is going to have its own requirements for opening an account. Make sure you understand the specific requirements of opening an account with the institution to make the bank switch as smooth as possible.
Here are some important requirements that you will want to look into when considering a new financial institution.
- Type of accounts available: Again, does your potential new bank offer the services you require? From checking and savings accounts to mortgages and personal loans, you will need to do your research to ensure your financial needs are going to be met.
- Minimum deposit requirements: Different institutions will have different minimum deposit requirements for different types of accounts. Sometimes it can be as little as $25 for a checking account but it could be anywhere from $5,000 to $10,000 for a money market account. Additionally, you will want to review the minimum balance requirements for each type of account to make sure that you can avoid fees.
- Required documentation: To open a new account at any type of financial institution you are going to need to gather documents that prove who you are and where you live. This might include two forms of identification, a social security card, and a proof of address. Each bank will be different so you will want to confirm what documents you will need for the account you’d like to open.
Opening a New Bank Account
Once you have identified a bank or credit union you would like to work with, it is time to start the process of opening a new account. At this time, you should also sign up for online banking and transfer any direct deposits or automatic payments over to the new account.
Here are some helpful tips for opening a new bank account.
Process of opening a new account
Although the process of opening a new account can vary depending on the account type and the institution you are working with, here are six general steps to follow.
- Compare various banks and credit unions to see what they offer for services, rates, and perks.
- Choose a bank and gather all the required information and documents needed to open the account.
- Prepare any minimum deposit amounts.
- Submit an account application and transfer funds.
- Set up online banking to make the process easier.
- Change the direct deposit and automatic payment information.
- Finalize the closing of the old account.
Customer reviews can be quite helpful when you are trying to imagine what it may look like to be a new customer at a particular bank.
Setting up direct deposits and automatic payments
Once the account is open, you will need to transfer any direct deposits and automatic payments you had set up through your previous bank. With online banking, you can do all of this from the comfort of your own home.
Ordering new checks or debit cards
Last, you will want to order any new checks, debit, or credit cards you may need and properly destroy any old ones you may have from your previous bank.
Moving Money to the New Account
After the account is operational, you can continue to transfer funds to complete the process of changing banks. You may also be required to pay transfer fees depending on the institutions you are working with, so make sure you calculate that into the cost of switching.
Here are some quick reminders about moving money between banks.
- Transferring funds from the old bank to the new bank: If you have online banking set up at both banks, you can easily do this in a matter of minutes. Transferring money via electronic wire transfer typically can come with a fee between $35 and $50, depending on the bank and whether the wire transfer is international or domestic. Check with your old and new banks to confirm fees.
- Ensuring that all transactions have cleared the old account: Once you have made the transfer, you will need to confirm with your old bank that all the funds have been disbursed and that the account is closed. Not ensuring the old account is properly closed could run you the risk of minimum balance fees.
Switching Over Your Automatic Payments and Deposits
Again, it is important to change overall direct deposits and automatic withdrawals to the new account right away. Doing so can make sure your money is in the right place to cover your financial obligations.
Here are a few quick reminders when switching over automatic payments and deposits.
- Updating your new bank details for any direct deposits: Make sure you speak with your employer about where to send your paychecks right away to ensure that your money gets into your new account without any interruption. Most companies have a simple direct deposit form you can complete to provide them with your new routing and account numbers.
- Changing any automatic payments to your new bank account: If you use automatic payments to cover utilities, streaming services, and other financial obligations, you will need to complete the process of changing your payment information with each one. Not doing this can lead to service interruptions and late fees.
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Closing the Old Account
Just like opening a new account, there is a formal process for closing the old account. After the initial transfer(s) have been completed, you will need to confirm the closure of your account at the old institution.
1. Confirming that all transactions have cleared: Before you finalize the bank switch, make sure you confirm all transactions are successfully completed. Transfers can sometimes take a few days to complete.
2. Formal process of closing the account: Although the process can be different from bank to bank, the formal process of closing an account is quite simple. Most institutions will have you complete a form either in person or online, and some banks may be able to do it over the phone with verbal confirmation.
3. Requesting written confirmation of the account closure: Always be sure that you ask for written confirmation from your old institution after closing an account. You can have them send it by mail or ask for an electronic document to keep for your records.
Tips for a Smooth Transition
The process of changing banks does not need to be stressful. This is especially true if you do your proper research beforehand to prepare for the transition.
Here are a few things to remember to ensure a smooth transition.
- Keeping both accounts open for a period of time: When switching to a new financial institution, it may be wise to keep both accounts open for a period of time so you can complete the process at a comfortable pace. Doing so could help you avoid any complications that could create additional headaches.
- Checking for any missed payments or deposits: With both accounts active for a period of time, you can ensure that all deposits are being sent to the new account and that all automatic payments are successfully completed with your updated payment information.
- Regularly monitor both accounts through online banking: During this period of transition, it is important to check your online banking for both accounts consistently. You don’t need to be paranoid, but a daily check-in would be wise to identify any errors.
Why Switch Banks?
Why do people switch banks? Sometimes it could be from a simple relocation, however, with how competitive the financial services industry is, it could often be to take advantage of better interest rates, lower fees, and other perks.
Here are some of the potential upsides to switching banks.
- Improved services: Customer service is incredibly important when it comes to your money, and some banks are much better at taking care of their customers. Additionally, some banks may offer services that your old bank did not. Like unemployment protection, mobile check deposit, and free ATM withdrawals.
- Better interest rates: With interest rates being so high as of late, if you are purchasing a new car, home, or other large ticket purchases, then it may be worth switching to a new bank that offers much more competitive interest rates. Doing so could save you an incredible amount of money over time.
- Lower fees: Many banks have been working toward lowering the amount and number of fees they charge to help attract new customers. Make sure to shop around for the banks that offer zero-free services as well as lower fees in general.
- Greater convenience: Are you looking for more ATM locations or free ATM withdrawals? How about 24-hour live chat and phone support? Some banks make it much more convenient for customers to take care of their banking needs.
With how competitive the financial services industry is, it could often be to take advantage of better interest rates, lower fees, and other perks.
Switching to a new bank can be a bit overwhelming. It is not just about finding the right bank and opening the account, but you also have many things to do. From changing over your direct deposit and automatic payments to gathering the required documentation, it can take some time. The good thing is that if you do your research and prepare early, you can make the entire process as painless as possible.