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How to Switch Banks

Posted By Jim On 09/20/2011 @ 7:06 am In Banking | 2 Comments

Banks have come under a lot of fire lately. Between the anger over bailouts (which I think is misplaced) to the increase in fees as a response to fee regulation (the regulation is a little unfair, the reaction is completely fair and should be expected), it’s no wonder people are moving banks. There are entire movements focused on getting people to quit the “Too Big To Fail” banks towards community banks and credit unions, which presumably focus more on the local area.

Whatever your reasoning, switching banks can be a little scary. It’s scary because banking has become such an integral part of our lives. We have one checking account that is connected to almost every other financial account we have. We pay credit cards from that account, our water bill is direct debited, paychecks are direct deposited, insurances are direct debited. Everything flows through that account (which is how the bank likes it!) and changing it can seem very daunting… but it’s not.

The basic process is simple – open a new account, transfer over all direct deposit and bill pays, wait a month to make sure you didn’t forget something, and then close the old account. We’ll go through each step and explain what I did the last time I moved banks.

Open the New Account

The first step to switching banks is to open an account with the new bank. I recommending finding one that meets these qualifications:

  • No fees. One of the reasons you’re probably leaving your old bank is because they’re going to start some new fee that you can’t easily avoid. So you’ll want to find a bank that won’t charge you those fees and will probably not start charging those fees. Going from one big bank to another big bank may be a good short term strategy, but how do you know if the new one will start charging? Unfortunately you can’t, so when you do pick a new bank, either go online (lower overhead, less likely to start fees) or go with a bank with a fee that you can easily avoid.
  • Good rates. Check the rates for both deposit (savings, checking) accounts and loans, since you may one day need one. Credit unions usually beat out banks in this but you never know, there are some local community banks that are very credit-union-like in their rates and their personal touch.
  • Convenience. I have a Bank of America account because their ATMs are everywhere, make sure that your new bank has all the bells and whistles you’ve come to enjoy with your old bank. If you want lots of ATMs but the new bank doesn’t have them, what is their ATM fee reimbursement policy? Many online banks, who have no ATMs of their own, compete with brick and mortar banks by reimbursing these fees.

In the end, you want to pick a bank that works for you, keeps you happy, and doesn’t surprise you with a fee.

Transfer Your Transactions

This is the only tricky part of the whole process because you probably have a lot of transactions from a lot of different places each month. I find that it’s always important to keep an up to date financial map [3] (now’s a good time to update it if you haven’t in a while), which can be helpful in identifying those transactions and ensuring you move them over properly. Here are a few of the bigger ones that you’ll want to make sure you cover:

  • Paycheck direct deposits
  • Utility bill pays
  • Credit card bill pays
  • Connections with other banks (so you can transfer money)
  • Any other direct deposits

After you’ve moved over these basic categories, chances are you’ll have forgotten something. That’s why you’ll want to wait a few weeks, or as long as you can before the fee kicks in, before closing the old account.

Closing the Old Account

This part is probably the scariest, since you don’t know which transactions you neglected to move over and which connections you failed to transfer. If you were able to wait a month, chances are all the important ones were moved over. Every so often you’ll find some transfer connection (bank to bank) that you forgot (I forgot to reconnect my Virtual Bank online account to my Bank of America account… five years ago), but that shouldn’t be a big deal.

So, that’s how I move banks whenever my old one no longer suits me (or bothers me enough that I want to take my business elsewhere). Do you have any best practices for moving your account?

(Photo: uhuru1701 [4])


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