How to Switch to a New Bank or Credit Union
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Table of Contents
Table of Contents
Have you been getting some signs that it could be time to open a new bank account or switch banks? Maybe you’re after a higher interest rate. Maybe you’re moving and want a bank with more locations in a new area. Or maybe you’re just fed up with bad customer service and want to take your business elsewhere.
Whatever the reason, switching your bank doesn’t have to be a hassle. Read on for our step-by-step guide to moving checking or savings accounts to a new financial institution.
Step 1: Figure out where to open your new account
For most of us, banks and credit unions, their not-for-profit equivalents, are key to our financial lives. But with so many options, how do you choose a new one when the old one no longer suits your needs?
Think about the features you want. Finding a bank or credit union with branches and ATMs near you might be important, or maybe you’d rather go with an online bank that has higher interest rates and a great ATM fee reimbursement program. Whether it’s brick-and-mortar or online-only, you’ll want a financial institution with low fees and high interest rates, especially on checking and savings accounts. Make sure the new bank has all of the services you want. (For a breakdown, see tips on how to choose a bank.)
Remember you don't need to have all of your accounts in one place. If you’re open to a bit of juggling, you can optimize your finances by opening accounts at different banks. For example, you can take advantage of a high annual percentage yield with an online savings account while keeping a checking account open at a traditional bank that offers in-person customer service when you need it. Keep the number of accounts manageable to avoid accidental overdraws.
» Want cash for a new account? Check out the best bank bonuses
Step 2: Open an account at your new bank
Most banks make it easy to open a checking or savings account online or in person. You’ll typically need to supply basic personal information and documents, such as your name, address, a government-issued photo ID and Social Security number. If the bank requires it, you’ll need to transfer funds into your new account. You can often do this electronically from your old account at another bank (as long as it’s still open), but you may also be able to deposit cash or a check.
Your credit score probably won’t be checked. Many banks screen potential applicants by looking at ChexSystems, a database that shows if you’ve frequently overdrawn accounts in the past or had other banking issues, but no credit information. Some banks do a soft or hard credit pull, but only the hard pull (sometimes called a hard inquiry) results in a dip in your credit score that is usually short-lived. This credit inquiry might occur if you apply for a line of credit (for overdraft protection, for example) when you open a checking account.
Make sure you meet the minimum deposit requirement. While many banks require $0 to $100 to open a new account and earn interest, some require thousands of dollars. Make sure you have enough money before opening an account.
Step 3: Make a list of subscriptions, automatic payments, deposits and services at your old bank
For a seamless transition to your new bank account, pull up a year's worth of transaction history to note any of the following:
Direct deposits.
Automatic bill payments and subscriptions (monthly or annual).
Recurring transfers.
Linked accounts.
Also note any bank services you currently use, which may include:
Banking alerts via email or text.
Mobile app.
Paper checks.
» Want to compare options? See our list of best checking accounts
Step 4: Begin transitioning your cash and service payments to your new account
You wouldn’t move out of your house or apartment without making sure the essentials — gas, water, electricity — are functioning at your new place. The same logic applies here. Open the new account before closing your old one and switch in stages while you move over recurring payments or deposits.
Keep some money in the old account. You should have enough money in the old account to avoid a minimum-balance fee and to cover any automatic payments or checks that haven’t cleared.
Change any direct deposits. Update your financial information at any place that deposits money directly into your account (such as your employer) so that checks are sent to your new bank account.
Reschedule automatic payments. Schedule future bill payments from your new account once you have enough money in it to cover those transactions.
Check off the rest of your list. Go back to your planning list and address anything still left to do: Order checks, rent a new safe deposit box, download the bank's mobile app and so on.
Update old account information stored with any service providers, including credit cards, cable company and cell phone carrier. Some merchants will notify you when a payment fails, but others might not, causing bills to become late and pile up, which can affect your credit.
» Learn more: How to set up the right accounts and alerts
Step 5: Close your old account
Once you're sure all automatic transactions have cleared, you’re ready to close your old accounts. The Consumer Financial Protection Bureau recommends getting a written document confirming that an account has been closed.
When it comes to closing the account, you may have a few options, including doing it over the phone, in a written request or in person. Be aware your bank probably doesn’t want to lose you as a customer and may try to talk you out of leaving.
Banks also sometimes reactivate closed accounts to fulfill automatic payments or deposits that come in. To avoid this, make sure to empty and close the account when you’ve confirmed that all direct deposits and automatic payments have been successfully rerouted to the new account.
If you have any doubts, talk to your old bank about its account-reopening policies.
» RELATED: Learn ways to clean up your bank accounts
Step 6: Enjoy your new account and double check that all your autopays have transferred
Once you're done with the old account, continue to learn more about your money's new home. Take advantage of the features it may offer that can help you get on track with financial goals, and stay vigilant about avoiding overdraft fees and monthly costs.
Finally, even if you made sure to transfer all autopays before closing the old account, you'll want to make sure the transfers were successful by checking the monthly statements.
