How to Switch Banks in 5 Easy Steps

Switching banks may seem as daunting as buying a new computer or doing your own taxes — or both, put together. You’d love better service, but dread the tedium of the transfer, set-up, and orientation process. There have been times when I’ve wanted to change banks, but the thought of going through all the hassle just didn’t seem worth it.

While it does take some effort, moving your accounts from one bank to another is really not that difficult. There are a few traps to watch out for (see below), but the process is not as painful as we sometimes make it out to be. I’m in the process of changing my business bank accounts from Capital One to Citibank and thought it would be a good time to cover the steps you should take if you ever want to switch banks.

Step 1: Choose Your New Bank: You may already have a new bank in mind, but if not, it’s time to do a little bit of homework. To find a new bank, you might start by asking friends and family members if they are happy with their bank. Current customers have the low-down on what a bank is really like. How long are the lines at lunchtime? How user-friendly is the online banking? How accessible are the ATMs? These are questions that only a current customer can answer. Call it a shortcut, but they’ve already done the legwork you’re setting out to do.

You should also consider local banks and credit unions. Often these smaller financial institutions offer great service and competitive rates. And finally, it’s worth consider some of the best online banks. Because they don’t have the expense of maintaining branches, online banks typically offer the highest interest rates on savings accounts, high yield CDs, and even free checking accounts.

Step 2: Open the New Bank Account: The next critical step is to open your new bank account before closing your old one. It may seem like an obvious step, but sometimes in frustration with their current bank, people close an existing account out of anger. Resist this temptation. No matter how anxious you are to switch banks, open your new account first. This includes not only applying for the new account, but getting your debit card and checks. You want to have the new account fully in place and ready to go.

Step 3: Set Up Direct Deposit: If you use direct deposit for your paycheck or government benefits check, set up direct deposit to your new bank account. Setting up direct deposit is extremely easy, and your new bank can walk you through the steps. All you will need is the bank’s routing number and your account number, both of which will appear on your new checks:

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Step 4: Switch Automatic Payments: You may pay a number of bills automatically from your old bank account. For example, we have our mortgage, home equity line of credit payment, and several utility bills paid automatically from our checking account. You may also have automatic transfers from your checking account to some form of savings or brokerage account. If you use these automated features, you’ll need to change them over to your new bank account. This is a critical step that can trip up folks. If you close your old account before making these changes, you may miss important payments. It’s also critical to remember to keep enough money in your old account to cover these payments until you’ve made the switch.

Step 5: Close Your Old Account: Go to your old bank and close your account once all checks and other withdrawals have cleared and you are certain that your automatic payments are successfully being withdrawn from the new account. With this step, it’s critical to make sure all payments have cleared your old account, otherwise you could end up bouncing a check.

Some banks, like online bank EverBank, offers a brochure to help walk you through the bank switch process (download the pdf here).

At the end of the day, it can really pay to switch banks. In fact, as the banking industry gets back on its feet, you might find the incentives to do so downright irresistible.

Published or Updated: April 6, 2013
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Michael says:

    I applaud your effort with this post. While it may seem a little too basic for most of the traffic you get on your site, I remember the days of teaching Marines that having checks left in your checkbook does not mean you have money in the account. Hopefully this reaches someone it can help.

  2. Daniel Wise says:

    I have often used banks while traveling around the country and over sea’s. The only thing I have found is that most banks will “nickel and dime” you to death. It seemed that every time I turned around I was paying a surcharge for something.
    I finally had it with banks and switched to credit unions and for the past 35 years I have sworn off banks and even convince most of my friends to change to credit unions.

    All I can say is beware of any bank you go to, the will “nickle and dime” you too.

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