How to Switch Banks — Your Step-By-Step Guide

How to Switch Banks — Your Step-By-Step Guide

I’m thinking of using a new bank after some … disappointments … last year. Here’s how to switch banks if you’re ready to take advantage of a new financial institution.

Last year, I did something relatively unusual for me: I used my debit card at a store. I’m not sure that my debit card number was stolen during a breach of that store. Or if it was grabbed in some other data breach.

All I know is that the debit card number was stolen, and then someone went on a $1,500 online spending spree. I didn’t realize what happened until a friend contacted me to tell me that a regular payment his foundation had been declined.

When you have automatic payments, including making contributions to retirement accounts, emergency savings, and travel funds, plus having all the bills deducted, it’s amazing how quickly such a breach can rack up the fees.

So, while there was no question that I’d get my $1,500 back, we did have a fight over the close to $1,000 in overdraft and returned charge fees resulting from this mess. In the end, after three weeks of wrangling, we split the fees.

And I thought maybe, after 15 years, it was time to think about how to switch banks.

Why Do You Want to Switch Banks?

Switching banks can feel like a potential disaster. After all, our finances have so many moving parts now. So, deciding to switch banks can be a big deal.

Why do you want to switch it up?

I never seriously thought about switching it up until this little issue. Pay $5 a month for business checking? Sure, ok. Not happy about it, but I didn’t want the hassle of switching banks.

ATM fees at other banks? Whatever. I’ll just be careful about where I go.

At some point, though, everyone has a limit.

The reason you decide to switch banks might have to do with:

  • Monthly fees
  • Costs
  • Minimums
  • Customer service
  • Accessibility

Think about what you’d like in a bank, what you’re getting now, and if it makes sense to change things up.

In my case, I’m looking at three major contenders:

  1. Radius Bank Hybrid Checking: This is an account that earns 0.85% APY on balances of at least $2,500, and offers free ATMs all over the world. No fees and no minimums. It makes it very attractive to me.
  2. Capital One: I have an account from back when ING was a Thing. I had opened a savings account for my son, and then opened one for me and then got myself a checking account. I don’t use it much, but there are no minimums and fees, and there’s a generous overdraft policy that I like — just in case I get in a jam. This is kind of a lazy option since it wouldn’t require me to do anything new.
  3. Aspiration: This bank intrigues me because it has no minimums and fees and has a mission to give some of its profits to charity. Plus, it has an interest-bearing checking account option. I’d like to learn more about this.

In the end, I’m not sure what I’ll pick. It’s not always about interest rate or lack of fees. It’s about what matters to you and what your financial values are.

You might have your own list of banks you want to contemplate. Think about what matters to you, and then research a few banks that seem like a good fit.

So, now that you have some possibilities in mind, here’s how to switch banks:

Step 1: Quit Using Your Current Bank for Spending Transactions

Stop using your current account for transactions. Quit using your debit card for that account. Withdraw enough extra cash so that you can take care of your expenses for a few days. Also, double-check to see if there are minimums you need to worry about. You don’t want to be subject to extra charges.

Or, if you’re like me and have a backup account, you can plan on using that. I’ve transferred a few hundred dollars to the Capital One checking account, just to help with this transition.

Don’t forget to cancel your automatic debits, too. Make a list of the items that come out of your bank account each month. My list is fairly short. I have a charitable contribution, my insurance premiums, my utilities, and the payments I’m making to the IRS and the State of Utah after the devastating tax bills following my divorce.

All my other automatic payments go on credit cards, and I pay the credit card bills later.

Try to keep track of which payments still need to clear your account. That way, you can tell when it’s safe to close your account.

Don’t touch the direct deposits and similar payment arrangements just yet. The important thing is to first stop the money coming out and let the scheduled transactions work through the system.

Step 2: Set Up With a New Financial Institution

I haven’t yet decided whether the laziness will win out and I’ll just make Capital One my go-to, or if I’ll open a new account at a different institution. I’m still researching and considering what to do next.

At any rate, your next move is to set up your new account. There are a lot of great online banks — and local and regional banks and credit unions — that offer good terms.

Find out what you need to open your new account ahead of time and gather your information. You’ll have to sign documentation related to the PATRIOT Act, but even with that, you can still probably open an account in less than 10 minutes.

If you open the account in person, just use some of your cash to deposit $50 or $100 initially. When using an online system, have it transferred from your old account. Just make sure you have enough money in the old account for your initial deposit.

Step 3: Move Your Direct Deposits to the New Bank

Once you have your new account open, shift your direct deposits to the new account. The new bank or credit union should provide you with the proper routing and account numbers.

Find out from your employer which paperwork you need to fill out in order to make the switch. It should be fairly straightforward and happen by your next payday. Confirm when it will take effect, though, so that you can plan.

Next, if you have PayPal, switch your bank information to the new financial institution. Other payment systems should be set up for money to go into the new account as well.

Step 4: Set Up New Automatic Payments

Now it’s time to set up new automatic payments with your new account. Once direct deposits are going into the new account, you can begin arranging to have the money taken from there.

Personally, I like using credit cards for these types of transactions whenever I can. I earn points — including when I pay rent. In fact, having my rent on a credit card is one airline ticket a year just by itself. However, if you don’t like the idea of using your credit card, that’s not a big deal. You can still use your checking account for those automatic payments.

Find out what you need to do in order to switch the automatic payments and go through that process for everything on your list. Then, watch to see that everything works as it should.

Step 5: Close Your Old Account

Finally, once you verify that all your old transactions are through the system, and once you make sure direct deposit works as it should, it’s time to close your old account.

Don’t let them try to convince you to stay. If you’ve already gone through all the steps to learn how to switch banks, there’s no reason to backpedal.

Withdraw any remaining amount and decide what to do with it. Confirm that the account is closed and you won’t be charged any fees for dropping below the minimum or for account maintenance.

How to Switch Banks: Just Do It If You’re Unsatisfied

Switching banks can seem like a daunting task. And you do need to get your ducks in a row to make it work. But if you approach things in a step-by-step manner and stay organized, it can be a simple process.

So it’s time for me to stop being lazy and make this move myself.

Have you ever switched banks before? What steps did you take?

This post was sponsored as part of a campaign with Radius Bank.

Written by Miranda Marquit

Miranda Marquit is a freelance writer and professional blogger, specializing in personal finance, small business, and investing topics. She writes for a number of financial web sites and blogs, and has been featured in numerous media. Read about life as a freelancer at MirandaMarquit.com and in her book Confessions of a Professional Blogger.

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