It’s easy to get comfortable when you’re in a relationship – even when that relationship is with your bank. If you’ve been banking with the same financial institution for years, you might wonder whether there’s something better out there. And you’re not alone, as 44% of Gen Z have switched banks.¹
If you’re ready to change banks, help is at hand. Here’s a step-by-step guide on how to switch banks for a smooth transition.
Step 1. Choose a new bank
There are hundreds of banks and credit unions, so choosing a bank can seem daunting. Start by determining which features are the most important to you.
Do you prefer an online-only bank so you can control your finances from your mobile app? Or are you considering a credit union that may offer a higher APY on savings?
Make a checklist of your non-negotiables for a new bank and use it to compare financial institutions.
Factors to consider when changing banks
- Fees: Some institutions may charge account maintenance fees. Before opening an account, find out what those fees are and if you can avoid fees by keeping your account balance above a certain amount. There may also be ATM and overdraft fees associated with the account. Look for options with no overdraft fees or minimum balance requirements.
- Interest rates: Checking accounts will typically not have interest rates, since they are primarily for everyday spending. When opening a savings account, look for banks that offer high-interest or high-yield savings accounts to help you save more money for the future.
- Minimum balance requirements: Some checking and savings accounts require a minimum balance. If your balance dips below this threshold, you may be charged an account maintenance fee.
- Branch and ATM locations: If you will need to visit your financial institution in person or use ATMs to withdraw or deposit cash into your account, make sure the bank you choose has ATM locations you can access conveniently. You will likely be charged a transaction fee to use an out-of-network ATM.
- Customer service: You want your bank to be available anytime you need help. Look for banks that offer 24/7 customer service with multiple communication methods. Many banks offer online chat, phone, and in-app communication.
- Security: It’s your money, and you want to be sure the institution you choose has taken security measures to protect your account. Your checking and savings account should be encrypted with two-factor authentication for password recovery and logging in from a new device.
- Online banking options: Explore bank accounts that can be easily managed from your phone. This takes away the hassle of managing your finances in person.
- Automatic bill pay: Forgetting to pay your bills costs you late fees or penalties, and can hurt your credit. Accounts with automatic bill pay allow you to set up recurring payments so you don’t miss your bills.
- Early direct deposits: Some options offer early direct deposit, meaning you can access your paycheck earlier than at some traditional banks. This is different from standard direct deposits, which require you to wait until the funds have cleared.
Review your options and go with your gut. Ultimately, you’ll want to choose somewhere that makes your life easier and your finances more easily managed.
Step 2. Make a list of your automatic payments and direct deposits
Before opening a new account, evaluate your finances by listing your automatic payments and direct deposits. Include your paycheck, monthly bills, subscription services, savings, and investment contributions.
List the average amounts and approximate dates of each transaction so you can set them up in your new account when the time comes. Reviewing a year’s worth of bank statements can help ensure you’re not missing any automatic transactions.
Step 3. Open your new account
The next step is to open an account with your new bank. You may be able to open an account online or over the phone, though some banks might require you to visit their physical branch (if they have one).
Check your new institution’s requirements for opening an account, which will likely include personal documents and information, like:
- First and last name
- Photo identification (driver’s license, U.S. passport, or military ID)
- Social security number
- Birthdate
- Proof of mailing address or physical address
- Email and a password
Once your account is open, you’ll need to make an initial deposit. Some financial institutions require a minimum amount to open or maintain an account, and some require minimum balances for extra features like waiving fees. The required amount varies depending on the financial institution and the type of account you open.
Step 4. Move your money
Move your funds to your new account before you close your old one. There are several ways to do this:
- Withdraw your money in cash and deposit it in the new account.
- Request a cashier’s check or money order of your total funds to bring or send to your new bank.
- Transfer money online from the old account to the new one (but be aware that some banks charge a fee for this).
Rather than transferring the entire amount, leave enough money in your old bank account to cover any pending transactions or automatic payments. This prevents accidental overdrafts and late fees.
Step 5. Update your automatic payments and direct deposits
Next, transfer your automatic payments and deposits to your new account. This is the ideal time to cancel subscriptions and services you no longer use. That money can go toward building an emergency fund or be stashed in a high-yield savings account to grow for the future.
Once you’ve trimmed the fat, it’s time to update your payment information with each service or product. Visit the company’s billing or payment center, remove your old account information, and enter your new account numbers.
If you use direct deposit, change your paycheck details with your employer so that your hard-earned money routes to your new account and you don’t miss out on your earnings. If you use an on-demand pay tool, check that your account info is accurate so you can access money when needed.
Step 6. Close your old bank account
Before closing your old account, double-check that all automatic transfers are cleared with your new account.
Depending on your bank, you can close your account over the phone, in a written request, or in person. Ask whether the bank charges a fee for closing an account – some may do this if you’ve only recently opened it. Once you’ve closed the account, request a formal written verification letter for your records.
After your account is closed, destroy your debit cards and checks. However, keep your bank statements, as they can be helpful when you’re preparing to file your taxes.
When should you consider changing banks?
Switching banks isn’t an overly complicated process, but transferring your money and updating all your direct deposits and automatic payments can take time. However, there are times when it makes sense to switch banks. Here are a few common scenarios.
- The new bank has a higher APY on its deposit accounts than your current bank.
- The new bank has lower fees than your current bank.
- Loan options at the new bank are better, and borrowing money will cost you less.
- The new bank has a generous bonus offer for opening an account.
- Your current bank’s ATM network is less extensive than the new bank’s.
- You want to be able to bank in person at a local branch, but yours doesn’t have any.
- You want to ditch your brick-and-mortar bank in favor of an online bank.
- Your current bank’s customer service is unreliable or unhelpful.
Consider contacting your bank and asking whether they will lower your fees or whether they offer deposit accounts with a higher APY. You might find that your bank is willing to work to keep you as a customer – but if not, you’ll know that learning how to change banks is the best decision.
Possible downsides of changing banks
Switching banks can be a wise financial decision, but some potential downsides exist. Here are three possible cons of changing banks.
- Forgetting to switch an automatic payment. If you pay a lot of bills automatically, there’s a chance you may forget to switch one of them to your new bank account. This could result in a missed payment and potentially a late fee.
- It may trigger a hard credit pull. Applying for a bank account generally doesn’t require a hard credit inquiry, but it can slightly impact your credit score if it does. Check with the new bank before you apply so you know what to expect.
- You might lose out on interest. It can take a few days to transfer money from your old bank to your new one, and your money won’t earn interest during this period.
You can avoid these cons by learning how to switch bank accounts properly and double-checking each step to prevent unexpected issues.
Ready? Make the switch
There are many reasons why people change banks. Some are reluctant to switch because they think it takes too much time and will be a headache. However, the process doesn’t need to be overly complicated if you follow the steps outlined in this guide. If you’re unhappy with your current financial institution, switching to a new bank will be worth it in the long run.
Not sure what type of account to open? Learn about the four must-know types of bank accounts.
FAQs
How do I find the best bank for my finances?
The best way to determine the right bank for your finances is to evaluate the features of different banks and what they offer and compare these to your priorities. Research online or visit a physical branch to learn the ins and outs of a bank’s services and products. Once you feel like you’ve got all the information you need, you can make an intentional decision to make the best move for your money.
Does changing banks affect your credit score?
Bank switching shouldn’t affect your credit score unless you simultaneously apply for a new credit card.
When is the best time to change banks?
The best time to change banks depends on your circumstances. If you are moving or trying to save money on bank fees or with your interest rates, you’ll need to act quickly. But if you’re not in a rush, the best time might be the first of the new year for a fresh start. Do what works best for your schedule and finances.
How long does it take to change direct deposit from one bank to another?
The exact timeline depends on the bank. Changing direct deposit from one bank to another could take as little as a day or as long as several weeks.