Closing your current bank account and opening a new one is like a dance—all you have to do is learn the steps. These proactive moves could help you avoid unnecessary charges and other unpleasant surprises that could get in the way of your smooth transition.
There could be advantages to switching to a new bank— maybe the new bank does not charge fees for ATM usage, offers a higher interest rate, or does not penalize you for low balances or for overdrafting. These small charges could add up to a big chunk of change over time!
Before you make the jump, you might consider the following:
Finding a New Bank
Work backwards. You might want to find a new bank before you take any steps to close your existing account.
This leaves you some wiggle room in the event that you have to write a check (yep, you remember checks), or need to perform an electronic transaction, like paying a bill.
Avoiding interrupting the flow
Most of us pay all of our bills online now, but if your creditors don’t know where to find you, it could mean late charges. Interruptions like these could affect your credit rating. A few proactive steps could make the difference—find out which automated accounts need to be redirected to your new bank.
This could include anything from rent payments and credit card bills to your streaming service, gym membership, life insurance premiums, and online magazine subscriptions. Your automatic savings and investment plans could be affected as well—make sure you attach those regular withdrawals to your new account.
Asking your old bank about any transfer or closed-account fees.
You may want to ask your old bank if you need to make your account closing official with a letter or email. Find out if there are penalties charged for closing accounts, or transfer limits.
Putting closure on it.
Don’t forget about any pending transactions that may be taking place during the course of your transition. If you are making the move at the end of the month, for instance, you might want to make sure all of those monthly payments and obligations are paid.
Contacting your employer
If you are enrolled in a direct deposit program at work, your HR or payroll department will need to know your new bank account information and when the change takes place. This can help eliminate any trip-ups on payday.
Of course, this goes for any other direct deposits you currently have going on. For instance, dividends and other investments, or, if you own property, tenant rent payments, etc.
Getting it in writing.
You might want to ask your bank to provide a written letter that officially states that your account is closed. Consider calling customer service to get this done, or, if possible, you could walk into the closest bank branch and request the letter in person.
You might ask how they will return any remaining funds that could be due to you—perhaps it will arrive in the form of a check or deposited directly into your new account.
Receiving a written letter stating that your old account is closed may help you to avoid future charges or accidental reactivation.
Cutting up your checks and debit card.
Erase them from existence so you can reduce the likelihood of your account being used illegally. Besides, shredding is fun.
Don’t lose the confirmation letter the bank sends to you upon closing your account—you may need it to prove that you’ve moved on.
You’ve got to keep them separated.
Sure, it’s best to simplify, but sometimes it can make more sense to maintain separate accounts, to keep your funds from co-mingling. For instance, if you’re a freelancer, independent contractor, or entrepreneur, it may be good to keep your business and personal financial activities separate, for tax purposes.
If you’re saving for something special, like a trip or a new laptop, a separate account may help you achieve that goal faster, as you can see the dollars accumulate toward your goal.
Seeing the number grow might help keep you motivated! Long-term goals, like retirement or college expenses, may also benefit from separate accounts. Emergency savings may also be better placed in a separate account, so you’re not as likely to use it for impulsive splurging.
Opening a joint account?
A joint account is when more than one person has ownership over the account—it’s often understood as an account shared by a married couple, but it doesn’t have to be.
There are joint account types that can also work for business partners, adult children with aging parents, siblings, or anyone else with whom you have a relationship involving money.
A joint account helps ease the financial flow among the account holders, while keeping the account’s activities transparent for everyone involved.
Moving an account like this to a new bank, of course, takes a unanimous vote—everyone needs to be on board before you can close the current account.
If you’re the one doing the convincing that it would make sense to seek a new bank, it may take a list of the advantages, including a higher interest rate, less (or no) banking fees, and other benefits that can help make the move worthwhile for all the joint account holders.
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Change can be good, especially if it helps you grow
Closing an old bank account and opening a new one doesn’t have to be a harrowing experience. When looking for a new bank, make sure that the grass really is greener on the other side—check out the new bank’s minimum balance requirements, fees, and withdrawal/transfer limits.
You can keep this list handy when new-bank shopping, making sure each category meets your personal requirements:
• Fees. That’s your money the bank will be using, and fees could add up quickly. You may want to consider opening an account that is fee-free. This could be at a bank or at another financial institution.
• Interest rates. This is the money the bank pays you to keep your money with them. How is that rate doing for you? These rates can get competitive among banks, so consider some careful rate shopping.
• Location. This could mean a brick-and-mortar location in your neighborhood, but it could also be the ability to handle all of your financial transactions simply from your phone. You may also consider the number of ATMs you will have access to, and whether or not they are fee-free.
• Digital capabilities. Your phone has already become one of your best friends—you could allow your bank to have your back too, with push alerts when your funds are low, and reminders when bills are due. Check out the bank’s ratings and reviews when it comes to its digital capabilities.
• Investment options. You may want to consider a bank that gives you more than merely checkings and savings. How about some long-term investment options, like college or retirement savings?
• Fine print. Don’t simply rely on a bank’s happy marketing messages. Be aware of the finer details, like terms and conditions, expiration dates for introductory annual percentage rates (APRs), maintenance fees, and out-of-network ATM charges. In other words, what is this bank going to cost you, and how? Also, find out if the bank is FDIC-insured.
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