Thinking of switching banks? Whether you just moved or are just looking for a fresh start at a new bank, the task of switching might sound daunting. You may have direct deposit, automatic bill pay, checks and other features set up at your existing bank.
It’s actually not hard to switch banks and may be necessary if you can get better banking terms or other benefits that can save you time and money. Here are 6 easy steps to switch your bank in no time.
1. Choosing a different bank
Choosing your new bank is an important decision and depends on a few factors. You may already have a bank name in mind or perhaps you saw a new sign-up offer you wanted to try out. Some banks will offer sign-on bonuses to new customers who meet certain requirements such as setting up direct deposit or maintaining a minimum account balance within a certain timeframe.
Aside from these offers, consider details like what type of accounts the bank offers and the requirements to open an account. Are there monthly fees or a minimum balance requirement? Is the bank easily accessible either online and/or in person via a local branch?
Feel free to also check out reviews on the bank online and see if the institution aligns with other goals or values you have such as helping out small business owners or supporting the local community.
2. Make a to-do list
Once you find a bank you like, start making a to-do list of things you’ll need to change once you switch over. The best way to do this is to go through your existing bank’s monthly statement or scroll through recent transactions online.
Make note of your direct deposit (especially if you have multiple ones), automatic payments, subscriptions and other services that you spend money on regularly. This also includes recurring transfers such as to your savings account or retirement account.
Start this list about a week or two before you plan to make the switch. That way, you can add things as you see them instead of trying to catch every automatic bill or payment in one sitting.
3. Open a new bank account
Next, it’s time to open a bank account at your new bank. Depending on the bank you choose, you may be able to do this completely online. Or, if you prefer to visit a local branch, you can sit down with a banker and they’ll walk you through the process.
To open an account, you’ll need to apply and submit basic information like your:
- Driver’s license
- Social security number
- Phone number
Banks and credit unions typically don’t check your credit score when you apply to open an account. However, they will check past banking history using a ChexSystems report. This is like a credit report for banks that shows any past issues at a previous bank like frequent overdraft fees or negative account balances that didn’t get addressed.
If you’re approved to open a bank account, you’ll be asked to make an opening deposit. Some banks have minimum opening deposit requirements while others don’t. If you’re opening an account with an online bank, you’ll need to make your deposit by transferring funds from another bank account. This means you’ll need to connect an external bank account to your new bank, which can take a few days to verify.
4. Redirect your automatic payments and deposits to the new bank
After you set up your bank account, start redirecting your automatic payments and other deposits from your old bank to your new bank. If you have direct deposit set up through your employer, you’ll need to give them the new banking information. Some employers take at least one to two payment cycles to process the change and switch to your new bank. So consider setting up direct deposit first.
Then, it’s just a matter of logging into your financial accounts from your list and changing the banking information. Keep track of when certain bills or subscriptions are due so you can know whether to keep some money in your old bank account until you’ve updated all your details and the changes go into effect.
Finally, switch your automatic transfers to other accounts like an external savings account or retirement account if you have one.
5. Validate your account: All payments are transferred
Sometimes, there’s a brief waiting period before all scheduled payments are transferred to your new bank. You may need to validate the bank account, which could involve receiving one or two test transfers from the company that’s taking your payment.
The test transfers are small - usually less than $1 - and occur so you can verify the amount that was added to your account so the company knows it’s your account.
With direct deposit, make sure you submit all the required documents including a voided check. If you don’t have checks yet through the new bank, you can order some or ask for a letter from your bank to use to set up direct deposit instead.
6. Close your old bank account
The final step to switching banks is to close your old account so you don’t leave any loose ends. Closing your account sometimes requires that you go to the branch in person. If you’ve moved away, you should be able to close your account over the phone or online so long as you can verify your information.
Local banks prefer to close accounts in person so they can give you any cash that was in your account since the balance needs to be $0 to close it.
Switching banks is easier than ever today. If you’re feeling overwhelmed by the task, start implementing these 6 tips and give yourself a timeline. Break up the tasks so you’re only spending a few minutes per day on this project. Or, you can choose to block out time to do it all at once. You may be able to completely transfer everything in one week or less depending on your availability.
Does switching banks affect credit score?
No, switching banks will not impact your credit score.
Banks don’t check your credit score to open a checking or savings account. Some banks offer loans which impact your credit, but you don’t have to be a customer there to obtain a loan. The only way a bank account could negatively impact your credit report is if you owe the bank money and the issue goes unresolved. This could be due to an overdraft fee or negative balance that wasn’t taken care of and resulted in the bank reporting your non-payment to the credit bureaus.
Can you switch banks online?
Yes, if you’re considering switching to an online bank, the process will be easy. With physical banks, you may need to close your account in person. However, you can usually apply to open a bank account at a new bank completely online.
How long does it take to switch banks?
It depends on your schedule and timeline. The process of actually opening a new bank account and submitting your deposit could be done in less than an hour. Switching banks entirely, which includes setting up direct deposit and redirecting automatic transactions, may take up to a week or more due to the time it takes to verify your new banking information.