Many banks offer enticing deals — such as cash bonuses and a higher interest rate on savings — to attract new customers. Yet a GOBankingRates survey of 1,000 Americans found that only 6% took advantage of such deals. The other 94% of consumers are leaving free money on the table. Read on to learn how to switch bank accounts. It’s not as hard as you think — and the perks and rewards might be worth your while.
- What To Look Out For When Switching Banks
- When Does Switching Banks Make Sense?
- How To Switch Banks in 6 Steps
- How Long Should I Keep My Old Bank Account Open?
- Does Switching Banks Impact Your Credit Score?
- How Often Should I Switch Banks?
When considering switching to a new bank, review the financial institution’s terms and conditions to make sure the savings or checking account is best for your needs. Here are some specific things to look out for:
- Monthly charges and overdraft fees
- Minimum balance requirements
- Online bill pay and electronic payments options
- ATM access and fees
- Bank debit card or credit cards availability
- Checking or savings accounts’ interest rates
- Customer service ratings from the Better Business Bureau
Banks often run new-customer promotions with offers that range from bonus airline miles to $1,000 cash bonuses. Visit bank or credit union websites to review their bonuses or check out the GOBankingRates Best Bank Account Promotions monthly roundup. Typical requirements include a certain deposit amount to open an account and maintaining a minimum balance for a period of 60 to 90 days to receive the promotional offer.
Also, consider whether you belong to an affinity group that might get special perks from a particular bank. A number of banks and credit unions reward military members or people in certain professions or professional organizations, for example.
Banks make money in a variety of ways, and sometimes they aren’t to your advantage. Switching banks makes sense if you can save money on bank fees or if you’re dissatisfied with your current bank’s customer service. Depending on your banking habits, you might find it beneficial to switch from a local bank to an online bank. You might not have access to physical locations — but you can earn higher interest rates if you don’t mind doing most of your banking electronically.
Even if you find that a new bank offers the same services you currently receive from your existing bank, the new-customer bonus offer could make switching banks worthwhile. Depending on the number of direct deposits, automatic billing and subscriptions you have set up in your existing bank account, switching banks might be fairly simple to do.
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Once you have a good idea of which banks have the best new-customer deals and offer the bank account features you need, you’re halfway there. Follow these six steps on how to switch banks to transition from your old account to your new one without a hitch:
1. Search For and Choose a New Bank
Three main types of financial institutions are backed by the government so your funds are safe. These bank types are ready to welcome you as a new customer:
- Traditional Banks: The best banks offer physical locations and a variety of banking services, although they might charge higher fees and pay lower interest rates than credit unions or online banks.
- Credit Unions: These not-for-profit financial institutions offer services at more reasonable rates than traditional banks. You must qualify to become a member of a credit union through your profession, college or geographic area.
- Online Banks: These institutions often pay higher interest rates on savings than other bank types, and they don’t charge as many fees as a traditional bank. Online banks don’t have physical branches — the banking is done online or via mobile app.
2. Prepare the Documents Needed To Open a New Account
You’ll need the following items to open a new account:
- A government-issued photo ID such as a driver’s license or passport
- A second form of identification such as your Social Security card, birth certificate or recent bill showing your name and address
- Your Social Security number
- The funds required to open an account
3. Open Your New Bank Account
Most banks make opening a new bank account easy by offering an easy-to-follow online bank application process. Enter your personal details, including:
- Date of birth
- Social Security number
- Contact information such as email address and phone number
Once the application is complete, you’ll need to fund the account by sending an electronic payment from your existing account, mailing a check, visiting a local branch to make a deposit or using your debit or credit card to fund the new account.
4. Transfer Your Existing Subscriptions, Automatic Payments, Direct Deposits and Transfers From Your Old Account
Now that you’ve set up your new bank account and have account information like an account number, the nine-digit routing number and login, you’ll need to change the bank details for your direct deposits, automatic payments and other transactions.
Review the last few months of bank statements to find recent automatic payments, deposits and withdrawals to make sure you don’t miss any. You can also visit your old account’s online bill payments section to find a list of automatic payments you’ll need to change over to your new bank account.
5. Transfer Your Funds to Your New Account
Once you’ve changed all your automatic bills, payments and transfers over to the new bank account and you’re sure that all checks and payments have cleared, transfer your remaining funds to the new account. You can do so by:
- Sending a wire or electronic transfer from the old account to the new one
- Withdrawing the funds at a branch and depositing them to the new account
- Writing a check to yourself to deposit into your new account
6. Close Your Old Account
To close your old bank account, contact your financial institution. Some might close your account over the phone, whereas others might require you to visit a local branch or mail in a request. Once you’ve closed your account, shred all the checks and associated debit cards to secure them from identity thieves.
There is no set time to keep your old bank account open, although it would be a good idea to keep funds in the account for at least a couple of weeks to ensure all checks and automatic payments clear. Once you’re sure all transfers, direct deposits and automatic payments are drafting through your new account, it should be safe to close your old account.
Switching banks will not impact your credit score, but forgetting to transfer automatic payments or withdrawals to your new bank account could result in returned payments and a negative report to ChexSystems.
ChexSystems reports a consumer’s banking history to financial institutions. Unpaid or bounced checks that were never cleared up are reported to ChexSystems and remain in their system for up to five years, making it harder to open a new checking or savings account in the future.
Read More: 9 Banks That Don’t Use ChexSystems
Switching banks isn’t a difficult process once you know what steps to take. Banks want your business and offer promotions and incentives like cash bonuses and travel miles. Switching banks doesn’t affect your credit and can put some free money in your pocket. Make it a yearly habit to check for offers other banks have for new customers — the earnings might be worth your time and effort to switch.
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