How to switch banks in 7 simple steps

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In a Nutshell

Switching banks can sound like a hassle, but comparison shopping for a new financial institution could help you score better interest rates and fewer fees. You may also find more of the features, products and services you seek.
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If the thought of switching banks makes you sweat, you’re not alone. Americans generally don’t change financial institutions much, mostly because they think switching will be a hassle.

According to a 2019 report from J.D. Power, just 4% of consumers switched banks in the year prior. And 61% of people who had never switched said they thought it would be difficult to do so, according to a 2015 study from Kasasa, a financial technology and marketing services company.

But switching your bank could deliver a host of benefits, including better interest rates on your deposit accounts or a better customer experience. And it doesn’t have to be difficult.

Let’s walk through some steps for switching your financial institution.

How can I switch banks? 7 steps to success.

The process of switching financial institutions can vary, depending on the institutions you’re switching between. Banks, credit unions and other financial institutions can have different requirements for opening and closing accounts.

But here are some general steps to help you navigate the switching process.

1. Research other financial institutions

Between a big bank, a local or community bank, online banks and credit unions, you have a wealth of banking options. At first glance, they have many similarities. But there are also differences worth evaluating as you look for a new financial institution.

A brick-and-mortar bank may offer more products, types of accounts and services, with large national banks having numerous branches and locations across the country. Online-only banks may offer higher interest rates on savings accounts. Member-owned credit unions, on the other hand, typically offer higher interest rates on deposit accounts and lower fees, but tend to have fewer branch locations.

Your financial needs, your financial life, what you’re looking for and how you bank should all play a role in your choice of financial institution. As you evaluate your options for how to switch banks, pay close attention to the following:

  • Fees and charges — Review all the fees a financial institution may charge you. Ask yourself honestly how likely you are to run into things like monthly maintenance fees, ATM fees, overdraft fees and other high fees. Keep in mind that many banks offer ways to avoid high maintenance fees, like using direct deposit or maintaining a minimum balance. Make sure you’ll be able to minimize these fees.
  • Interest rates — All banks must disclose the interest rate they pay out on savings accounts, usually as an annual percentage yield. Some financial institutions offer interest on checking accounts as well, though the rates are typically low — and these accounts can come with higher fees.
  • Better services — Look to see if the bank or credit union offers things like a mobile app, mobile deposit, a digital debit card, online banking, online bill pay or other services that are valuable to you.
  • Location and hours — While you probably can do most of your banking online, you may still occasionally need to visit a branch. If having access to a brick-and-mortar location is important to you, make sure the financial institution you’re considering has locations convenient to your daily life and is open during hours that work for you.

2. Open your new account

You can typically open a new account online or in person at a bank or credit union location, depending on the type of account. You’ll need to have two forms of ID, like those from the list below.

  • Driver’s license
  • U.S. passport
  • Military ID
  • Social Security card
  • Birth certificate
  • Bill with your name and address on it

You should also have your initial deposit. The required amount can vary, depending on the financial institution and the type of checking account you open.

3. Gather all your automatic deposit and payment info

Make a list of all the direct deposits, automatic bill payments and transfers scheduled on your old account, including the amounts and dates. You’ll need to set all these up in your new account (more on that in Step 5).

It may help to review your last few bank statements to make sure you’re not missing any automatic transactions you make on a monthly basis. Don’t forget about annual bills. In this step, also note directions these payees have for changing account information — whether this is online or through a customer service phone number.

4. Move your money

Once your new account is established, you can move your money from the old account to your new one. There are multiple ways to do this. You can write a check to yourself, drawing on your old account, and deposit it into your new one. Or, you may be able to transfer money online from the old account to the new one — although some banks charge fees for this type of transfer.

Make sure you leave enough money in your old bank account to cover any outstanding checks you’ve written, pending transactions or automatic payments you don’t switch. Cancel all the automatic payments from your old account that you’ll be paying from your new account.

5. Set up your new transactions

Here’s where that list you made in the third step will come in handy.

Work with your employer to change paycheck direct deposits to your new account and note the date your first check will arrive in the new account. Do the same with any benefits you receive, like Social Security.

Once you know the date of the deposit, you can arrange for automatic bill payments to route through your new account after that point. This is where the process may get a bit complex. You may need to fill out a form, call a service number or visit a website to switch payments from the old account to your new one. Some payees may require you to turn in a specialized authorization form.

6. Deposit your remaining funds in your new account

When your new account is all set with the new transactions and direct deposits, and all outstanding transactions have cleared on your old account, you can move any money that’s still left in the account. You may be able to transfer funds electronically or by cashier’s check. Personal checks might work, too, but typically take longer to clear.

7. Close the old account

Once your money arrives in the new account, it’s time to take the final step and close the old one. Call your old bank or visit one of their branch locations to make the request. Your old bank may require you to settle any overdrawn accounts before doing so, and watch out for any fees they might charge.

Be sure to get written confirmation that your old bank account is closed.

Why should I consider switching banks?

You’re probably already aware of the value shopping around in other aspects of your life, whether it’s for a car or a pair of shoes. Comparison shopping for a financial institution may help you discover a product, service or fee structure that’s worth switching for.

You might find a better interest rate for your savings, or lower fees for your checking account. A different financial institution may offer a lower monthly fee, a lower minimum balance, higher interest rates, or more convenient locations with easy access that will help you avoid ATM fees.

Switching may be easier than you think. In fact, Kasasa found that 81% of people who switched banks said it wasn’t difficult to do. Some financial institutions even offer assistance or “switch kits” to customers who want to learn how to switch banks.

Next steps

You can use the Federal Deposit Insurance Corporation lookup tool to find federally insured banks near you, then start your research.

Want to learn more about financial products and services? Check out the Consumer Financial Protection Bureau website for an overview of the common issues you might face with new bank accounts, and how-to guides for opening a new account.

Got complaints or questions about a bank or credit union? Visit the Federal Financial Institutions Examination Council’s Consumer Help Center.

About the author: Andrew Dunn is a veteran journalist with more than a decade of experience as a reporter and editor at North Carolina news organizations, including the Charlotte Observer and the StarNews in Wilmington. In those roles,… Read more.