Do you love your bank? Is it convenient? Do you feel valued? Are you getting a top-notch interest rate? Paying low or no fees?
If you can’t answer “yes” to all of those questions, it might be time to make a switch.
Changing banks can be a surprisingly simple process (though not instantaneous), and it can save you time and money. Here, we’ll break it down for you into three super simple steps, so you can complete the process as quickly and easily as possible. Read on for the guidance you need.
Should You Switch Banks?
There are many good reasons to switch banks. Perhaps one is advertising an incentive (such as a sign-on bonus) that’s too good to pass up. Or is offering a discount on a home loan rate if you open an account, and you want to snag that lower mortgage APR (annual percentage rate).
Or maybe you have realized that bank fees are eating away at your money. Consider these recent stats revealing how expensive banking can be:
• Monthly fees on non-interest checking average $5.08 and $16.35 on interest-bearing accounts.
• Insufficient or non-sufficient funds fees average a dizzying $33.58 each.
• Out-of-network ATM fees are typically $4.59 (ouch) per transaction.
It’s worth noting that fees aren’t the only reason to make a change: Interest rates can vary wildly. On savings accounts, you might earn 0.01% at a traditional bank and 2.00% APY at an online one. Also, for some people, they want a bank that better suits their needs; perhaps a local one that caters to first-time homebuyers or is a niche bank and understands their student-loan debt issues among healthcare professionals.
Whatever your situation and motivation, changing financial institutions can be a simple process. Next, learn the three easy steps that answer the question “How do you switch banks?”
How to Switch Banks
Step 1. Choose a New Account for Your Money
Identify the key benefits you want but currently don’t have and do an online search to compare options. For example, if you are looking to eliminate monthly fees, target that; if you are looking for a bank with branches near your home and office, make that your focus. The possible options should quickly come into focus via a search engine.
If lower fees and higher interest rates are driving your decision, you’ll likely want to review online banking options vs. traditional banks. Because these financial institutions don’t have the overhead of bricks-and-mortar locations and staffing, they can often pass those savings onto their customers. That’s a major benefit of online banking.
Similarly, credit unions vs. traditional banks often have lower fees and higher interest rates because they are non-profit organizations and therefore have a different business model.
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Step 2. Open Your New Account
Found a new home for your cash? Go and open that account. You can likely transfer funds from your old one to make that initial deposit.
Some bank accounts require no initial deposit if you sign on with direct deposit; others will need a small deposit of perhaps $25. If you are signing up for a premium checking account or high-yield account, there may be higher minimums involved.
Here’s an important point: Don’t whisk every last cent out of your old account into the new account. You may have pending transactions and autopays coming up that will take time to sort out. Leave a cushion in the old account; you’ll learn more about this in the next step.
Make sure to set up direct deposit from your employer directly into your new account. This will ensure that your pay appears in your account without having to deposit a physical check. Visit your HR or pay office and provide them with the new account information, including the new account number and routing number.
You may also want to link a savings account to your new checking account. This can make transfers easier and allow you to opt into overdraft protection.
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Step 3. Close Your Old Bank Account
Now that you have your new account, here’s how to close the old one while tying up any financial loose ends.
Cancel Automatic Payments and Direct Deposits
If you’re like most of us, you rely on autopay to simplify your banking; the pros of automatic payments are hard to ignore. This means that each month your various bills and subscriptions are seamlessly deducted from your primary account on their due date. To avoid falling behind on bills or accidentally getting your streaming service suspended, you need to turn off or redirect every automatic payment that currently comes out of the account you wish to close.
Take a look at your monthly account statement and make a list of every automatic deduction, from your electric bill to newspaper subscriptions. Once you’ve made your list, log in to each of your service provider accounts and change your payment information.
Also consider any automatic deposits you may receive. For instance, do you use P2P transfers on platforms like PayPal and Venmo? Update the info so when you transfer funds from those accounts, they go to your new checking.
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Wait For Any Pending Transactions To Clear
After you’ve canceled or rerouted all the automatic payments that deduct from the account you want to close, you will need to wait for any pending transactions to clear. These pending transactions are usually for bills or subscriptions that have one remaining payment left before the company can change your payment information.
Waiting for all pending transactions to clear ensures that your bills will be paid and your subscriptions will continue without facing any overdraft fees. Make sure there is enough money in the account you wish to close to cover any pending payments. Wait two weeks to one month for any automatic payments to be deducted.
Cut the Cord
Once you have transferred all automatic payments and possible deposits and waited a cycle for those to update, you’re done. It’s time to close your old account. Depending on where it’s held, you may be able to finalize this online or by phone. In other cases (usually at smaller local banks or credit unions), you may have to send a written request or turn up in person.
Be sure to transfer out any remaining funds or get a check for the amount left in the account.
Whether you close your account online or in person, make sure to request written confirmation that the account has been closed, says the Consumer Financial Protection Bureau. This is a safety-net move to protect you if some issue were to arise. When you receive the letter confirming your bank account is closed, make sure to save it somewhere safe for future reference.
You’re done! How easy is it to switch banks? Hopefully, you’ve learned that it’s not too hard.
As the personal banking market becomes ever more competitive, you may find yourself thinking about changing banks for the sake of better services, greater convenience, lower fees, higher interest rates, or other features. If you do find a new home for your money, it takes just three steps to make the switch. Yes, it’s a bit of effort, but the payoff can be well worth it.
If you are thinking of making a swap, take a look at what SoFi offers. When you open an online bank account with us, your money will grow faster. When you set up Checking and Savings with direct deposit, you won’t pay any account fees and you’ll earn a hyper competitive 2.00% APY.
How do I switch banks?
To switch banks, you’ll need to identify a new financial institution and fund your new account. Then, you will need to transfer automatic payments, deposits (say, via direct deposit or PayPal), and wait for them to update. Once that happens, you are ready to transfer any remaining funds and officially close your old account.
Are there downsides to switching banks?
If you’re wondering about cons or how hard it is to switch banks, know that changing banks requires some effort and patience. You will need to complete some forms and move any automatic payments or deposits to your new account, as well as wait a cycle while these update. But changing financial institutions should not involve a charge or impact your credit score.
What documents do I need to switch banks?
Typically, opening a new account requires government-issued photo ID, a Social Security or taxpayer identification number, and possibly proof of your current address (such as a copy of your utility bill). To close an account, you’ll probably need your government-issued photo ID and perhaps a bank statement or your debit card.
SoFi members with direct deposit can earn up to 2.00% annual percentage yield (APY) interest on all account balances in their Checking and Savings accounts (including Vaults). Members without direct deposit will earn 1.00% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. Rate of 2.00% APY is current as of 08/12/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
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