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Switching banks can be a major inconvenience, but having a clear, organized strategy can make all the difference. If you're planning to make a switch, this guide will help you do so with minimal hassle.
Choose the Right Bank for You
Since switching banks can be such a hassle, there’s usually a solid reason for wanting to leave your current one. Whether it's due to monthly fees or dissatisfaction with their practices, if you haven’t selected a new bank yet, it’s time to find one. Financial platform Bankrate highlights why this choice is crucial:
Picking the right financial institution is arguably the most critical step. If you choose a bank that isn’t a good fit, you may be back at square one in a few months.
Begin by evaluating your priorities and banking habits. Are you seeking an interest-bearing checking account? Would you prefer to work with a local credit union? List your top choices, then carefully review the details and check customer feedback. Focus on the following aspects:
Balance requirements
Fees
Interest rates (and how they change depending on your balance)
Convenience and ease of online banking
Branch locations
ATM availability and associated fees
Potential penalties
FDIC or NCUA insurance
Customer support
Verify Minimum Balance Requirements
The finance site Money Crashers recommends checking the balance requirements of your current account before making the switch:
Take note of any fees for falling below the required minimum balance and make sure to keep your balance above that threshold.
If you have any pending checks or bill payments linked to your old account, it's important to keep more than the minimum balance to cover those transactions.
By now, you should have already reviewed the balance requirements for your new account. To avoid any fees, ensure that you have enough funds to cover both accounts during the transition.
Check for Unprocessed Checks and Pending Payments
Frugal website DealNews warns that a bank switch can be costly if you "incur overdraft fees from unprocessed checks or pre-written checks and from managing automatic bill payments and direct deposits."
To avoid this, review your checkbook alongside your old bank statements. Have you written any checks that are still pending? If so, ensure you have enough funds in your old account to cover them.
Go over your statements and compile a list of all your recurring bill payments. Don't just think monthly – consider bills that are paid bi-monthly, quarterly, or annually. Be sure to account for those as well. Search your online banking history or Mint.com transactions for any automatic payments made throughout the year. Double-check that nothing is overlooked.
Open Your New Account
When setting up your account at the new bank or credit union, avoid closing your old account immediately. Even if there's no balance requirement, keep a small buffer in your old account until the transition is fully completed. You might have missed a pending check or automatic payment. This cushion will help protect you from overdraft fees, which can turn a smooth bank switch into an unexpected financial headache.
Order checks and ensure your new debit card is on its way.
Update your bill payment and direct deposit information.
After listing all your automatic payments, update those accounts with your new banking details. If there are any payments pending at your old bank, you should cancel and redirect them, as advised by Bankrate. However, if some payments are already in process, ensure your old account has sufficient funds to cover them.
Notify your employer and update your direct deposit details. Ask whether the change will take effect with the current pay cycle or the next one.
Close Your Old Account
Before closing your old account for good, verify the following:
Your direct deposits are now being deposited into your new account.
Your automatic bill payments are now linked to your new account.
All outstanding checks have cleared your old account.
Your new checks and debit card have arrived and are ready to use.
Once everything is settled, it's time to close your old account. Depending on your bank, you might need to call, send a letter, or visit a branch in person. Be sure to keep records of all communication.
Avoid Closing Fees
Since 2013, most major banks have eliminated account closing fees, according to the banking site MyBankTracker.com. While that's positive news, if your bank still charges this fee, you have options.
Some banks may impose a fee if your account hasn't been open for a long time. If this is the case, keep the account open until the required period passes, and then proceed to close it.
Other banks charge a fee to wire your remaining balance to a new account. The banking site Go Banking Rates suggests three simple methods to avoid wire transfer fees:
Withdraw the funds in cash at a nearby branch.
Write yourself a check from your old account and deposit it into your new one.
Set up an electronic transfer to move the funds.
Watch Out for a Zombie Account
Many bank accounts will automatically reopen if a deposit is made after the account is closed. This can be risky, as Go Banking Rates warns:
A reopened zombie account triggers monthly maintenance and minimum balance fees again. Customers unaware of this reopening can rack up significant penalties.
It's essential to ensure your direct deposit switch is fully processed before closing your old account. But to be safe in case of an error or overlooked payment, keep an eye on your old account. The survivalist website Off The Grid News recommends checking periodically for up to a year:
...set a reminder for yourself to review and confirm that the account remains closed each quarter during the first year after its closure.
At Bank of America, reopened zombie accounts show up in online banking. If you bank online, log in periodically to ensure the account is truly closed. If needed, contact your former bank to verify that your account hasn’t come back to life.
Eliminate a Zombie Bank Account
If you’ve fallen victim to a zombie bank account, there are ways to eliminate it, as consumer site Credit Card Select explains.
Always reach out to your bank if an account has reopened. You’re likely not to blame. If you have a signed document confirming your account’s closure, that’s even better. However, if your bank refuses to cooperate and you're still haunted by a zombie account, consider filing a complaint with the
Consumer Financial Protection Bureau
in the bank account section.
Switching banks can sometimes seem like more trouble than it's worth. However, there are many valid reasons to make the switch—like better interest rates, a more community-focused credit union, or simply wanting to avoid high monthly fees.
No matter your reason, having a clear and organized plan can make the bank switch process much smoother and less stressful.
