A Guide to Switching Banks
Whether you are looking for a new bank, because you are moving, you can save interest on a new loan or because you have had trouble with the bank you are currently at, it can be quite a process to successfully transfer everything over to a new bank. It is a time-consuming process and it is important that you carefully execute it in order to avoid any fees or confusion. The following steps will help you to successfully switch to a new bank.
Find a New Bank and Open Your Accounts
Although you may be worried about closing out your bank accounts at your old bank first, you will need to find your new bank first. You may want to consider switching to a credit union, which will have lower fees and higher interest rates on savings accounts. You will need to open the same types of accounts you currently have, which is likely a checking account and a basic savings account.
When you choose your new bank, you will want to consider many different options. The biggest should be the fees and interest that is involved with the bank. You may also consider convenience and how easy it is to visit your bank. You should make sure your bank is insured by the FDIC, which will protect your funds if there are any issues.
Change Your Direct Deposit
Once you open your account, you need to change any direct deposits you have so that they can go into your new account. If you have any other sources of direct deposit you will need to contact them to change the information. It is important to carefully monitor the change because it can take a pay cycle for it to go through, depending on when you change it and when the cut off is for the place that is sending you the money. This is one reason why you do not close down your old account first.
Generally, you can just change the information with your Human Resources department. However, if you receive payments from things like PayPal or other income sources, it is important to remember to include them, even if the payments are sporadic. You may not remember to make the change if it only happens once a year. It helps to keep a list of businesses that you receive direct deposits from.
Transfer Your Automatic Payments
Once your direct deposit is changed, you will need to change any automatic payments that are made from the account. Think of subscription services like Hulu or Netflix or automatic payments for things like your gym membership or any bills that you are automatically debited. The easiest way to do this is to look over your budget or personal finance software and go through the list of your payments to make any changes that are needed.
Many of the changes you can make online. Some may require you to call or go in to the business to make the changes. Set aside about an hour to take care of this. As you do this make a list that you can use if you need to make the changes again. This can save you time in the future because it can help streamline the process.
Consider Your Loans and Other Options
Some banks offer a lower interest rate if you have an automatic payment scheduled from your account at their bank to your car or home loan. If this is the case, you may want to transfer money into that account each month to cover the loan payment and leave your account open. To avoid any service fees, change your account type to the one with the lowest minimum balance possible and leave that money in the account.
Another option is to do an online transfer to cover the payment or you can stop in on payday to move the money into the old account. You may decide that the savings is not worth the effort, but you should be aware that if the interest rate goes up, so will your monthly payments. You may be able to make the transfer automatic which can make it easier. However, it is important to allow enough time for the transfer to go through and allow for things like weekends and banking holidays.
Close Your Account
Before you close your account, you need to make sure that everything has cleared. You should stop writing checks on the account as soon as you open a new one. You also need to be sure that all of your automatic payments have transferred over. It can take up to two months to be sure that you are ready to close your account. It is important to wait until everything is cleared because you will have to pay fees to merchants and possibly the bank if you have things come through on your closed account.
You can close your account by going into the bank in person and requesting that the bank closes the account. You will receive a check for any remaining balances on your account. Another option is to write them a letter that lists all of the account numbers that you want to close, and that you would like the remaining balances mailed to your home address. When you do this be sure that you close your overdraft account too.