How to Switch Banks
By Justin Pritchard. Banking/Loans Expert
Justin Pritchard helps consumers navigate the world of banking.
It can be intimidating to switch banks, but the process is easy if you break it into separate tasks. The list of steps below should help you make a smooth move to your new bank .
You need to be able to use the account before you pull the plug on your old account.
If you can afford it, you can also just fund both accounts with enough to cover the bills, and switch the bill payments to the new account. Either way, the idea is to start using your new account. If you’re going to write checks or use online bill pay. start writing checks from the new account and fund those payments by transferring money from your old account. This may sound like a lot of work (it's easier if you set up an electronic link between accounts ), but you need to stop using your old account and get into the routine of using your new account.
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Don’t just look through one month’s worth of transactions. Ideally you’ll look back over an entire year; three months is a bare minimum. You may only make certain payments annually or quarterly, and those tend to be important payments (life insurance premiums, for example). Other payments may be rare, such as PayPal drafts out of your checking account for infrequent eBay purchases.
Make a list of all your expenses, and check them off one-by-one as you make arrangements to switch them to your new bank account.
3) Redirect your income. If you have direct deposit going into your old account, start having those payments directed towards the new account. Of course you need to time this change with any payments that will come out of your old account -- you may need to transfer money between your old and new accounts (possibly by writing a check ) a few times before you’re done.
You can also try to time everything by making a full and complete change on a certain date. Look back through your transaction history and find a date that will give you some time. For
example, if you don’t have any automatic transactions between the 2nd and the 12th of each month, change everything on the 2nd so your service providers (electric company, mortgage, insurance, etc) and your employer have time to update your account information.
It may take several pay periods or billing cycles to have your bank account switched. Ask your employer how long the process takes, and schedule things accordingly. Be sure to consider all of your income sources, including:
- Social Security benefits
- Pension and annuity income
- Investment earnings and systematic payments
- How to Set Up Direct Deposit
- Avoid Headaches: Before You Change Banks.
5) Keep your account open as long as you can afford to. Don’t close your old account too quickly. It may take longer than you expect to update direct deposit and automatic billing instructions. Wait at least a month or two to be sure that everybody is using your new account information. If you’re switching banks due to fees, you probably can’t wait to close your account. However, if you’re changing for other reasons (a geographic move, for example) it’s safest to leave your old account open for a while.
6) Close the old account! You can finally close your account once you’re sure you don’t need it. Contact the bank and ask what is required to close the account (here's a sample letter to close accounts if you need it). Take your money out in cash (if it’s a small amount) or cashier’s check. You can also write a check to yourself to empty the account. When you close your account, make it official -- tell the bank that that’s what you’re doing so they stop paying interest and producing statements.Source: banking.about.com