I Want to Switch Banks

Alden Wicker

If you’ve been a little down on your bank lately, you’re not alone. Almost one in five bank and credit union customers in 2012 wanted to switch to another institution.

But when push comes to shove, only half of those people actually pull the trigger. The other half never do, thinking it’s just too much time and money.

We believe in choice, so we’re going to give you the step-by-step process for switching banks. We won’t promise it will be pain-free. But at least you’ll still clear of head-slapping moments (like when you realize you’ve overdrafted or created a “zombie account”) and make it through to the other side with a wonderful new bank that serves your needs.

Choose a new bank.

Before you start this process, the most important thing is to choose a better bank. You have many more options than just that nationwide bank on the corner. You could switch to a credit union or online bank, both of which often have much more favorable terms than brick and mortar banks. Start your search at SavingsAccounts.com and Bankrate.com. Once you narrow down your choices to five options or less, write down and compare these factors for each bank:

  • If the bank will charge maintenance fees for the account, and whether they kick in if you drop below a certain balance
  • How convenient in-network ATMs are to your home, work and play (or if all ATM fees are refunded)
  • Customer service ratings (MyBankTracker.com is a great place to start)
  • The interest rate on your checking and/or savings account
  • Interest rates on products you might want to use, like CDs, mortgages, car loans and personal loans

There’s a lot more to consider when choosing a bank, so check out our list of what to look for in a new bank here. After you’ve chosen your new bank, continue with the steps below to make the transition.

Time this will take: 1 day to 2 weeks

Transfer your automatic deposits and payments.

Ask your new bank for a “switch kit” which gives you all the information you need to move to the new bank, including instructions on changing automatic deposits and withdrawals.

Next, check all your account activity in your old bank accounts, either in the My Money Center, online on your old bank’s website or on statements going back several months. You’re looking for any payments or deposits that are automatic or recurring. Make a list of everything that needs changing. Some things to look for include:

  • Paycheck deposits, including freelance income direct deposits
  • Social Security, disability, unemployment or other government income
  • Monthly payments for music and movie services, charity donations, gym or other monthly memberships or newspaper subscriptions
  • Transfers between your accounts, like deposits to your savings account from your checking account

Use the information in your switch kit to transfer these deposits and withdrawals to your new bank. For some things, like automatic charity or subscription payments, you just need to log into your new account and change your bank or debit card information.

Time this will take: One to six weeks

Transfer some money to your new account.

You might be ready to zero out your account already, but hold off! This is where things get a little tricky. You need enough money in your new account to deal with any automatic transfers, deductions and payments you’ve switched. You also need enough money in your old account to handle any checks that haven’t been cashed or payments you somehow missed.

We suggest you look through your checkbook ledger or for invoices sent to you in the past few months, and make sure there are no outstanding payments you’ve made from your old account. If there are, a) make sure there’s enough money left in your old account to cover them, plus a small cushion for contingencies and b) contact anyone who’s been holding on to a check and ask them to go ahead to cash it. If drawing down your account also triggers maintenance fees that you didn’t have before, that’s another thing to consider.

Once you’re ready to transfer your money, you have a few options:

  • Wire transfers. This is most the most convenient, but also the most expensive. Wire transfers from big banks can cost anywhere from $24 to $30. However, the money will deposit to your new account within a day. Use this option if you are transferring a large amount of money and will need access to it immediately.
  • Electronic Transfers. This is similar to a wire transfer, but it costs less–either free or just a nominal fee of a few dollars. However, it will take one to three days to see the money show up in your account. Use this option if you are transferring a large amount of money and can do without the money for a few days.
  • Certified checks. This is slightly less expensive than a wire transfer–no more than $10 per check. But you have to physically carry or mail the check to the new bank, and then it can take a week for it to clear. That means you won’t have access to your money for that entire time. Because of this, we prefer some of the other methods here.
  • Cash. This involves withdrawing cash and depositing it in your new account. While this is free as long as you use an in-network ATM or teller, and money posts quickly, it’s also work-intensive. You can only draw a few hundred bucks at a time, and must physically carry it to a new bank. Also, it’s dangerous. Fingers crossed you don’t lose your wallet or get robbed! Use this option only if you are transferring less than a couple hundred dollars.

Time this will take: One day to one week

Get to know your new bank.

Pop into the My Money Center or your new bank’s online activity ledger every day and make sure everything is running smoothly–deposits are showing up, payments are getting made, etc. Also notice if the lag time between the date of a deposit or transfer and the date when the funds are available to you is different at your new bank. If so, you may want to adjust some transaction dates. For example, if the timing is too tight between a regular deposit and a regular payment, set up the transfer earlier, or ask for a later monthly due date on that bill.

Time to monitor activity: One month

Time to make adjustments: One day for each

Leave the old account open and check back.

If you close your former account and a transaction posts in it (your niece cashes her birthday check, you forget about an automatic deposit) then the account can automatically be reopened and go in the red (called a “zombie account”),  incurring overdraft fees without your knowing it until the bank happens to send a statement a month later. So leave a cash cushion in that old bank account, and check the My Money Center on a weekly basis (set a calendar alert for Monday morning, for example) and see if anything has changed. If an automatic deposit comes in or an auto-payment goes out, then set up that transaction with your new bank account. Wait until a whole month goes by without any account activity in your old account, you’re sure all outstanding debts are paid, and all your recurring payments are posting in your new account, then you can move on to the next step …

Time this will take: One to two months

Close the account!

Now you can say with confidence that nothing will pop up and reopen the account. Head into your old bank and speak with a representative about closing the account. If you can’t do this in person, you can also close the account over the phone or by mail. Withdraw the rest of the money from the account, get a check for the balance, have it wired to your new account or initiate an electronic transfer.

Note that drawing your account down to $0 is not the same as closing it, so notify the old bank that you are closing the account, make sure to get a copy of the paperwork confirming you closed the account and save it for your records.