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It can be easy to forget your bank serves an important purpose in your life, as your accounts hold your money without much thought or effort on your part. You probably have bills set up with automatic withdrawal or a credit card issued by the bank. But if you feel like your bank isn't giving you what you need, you may want to make a change. If you're considering switching banks, here's a step-by-step guide on how to do it as stress-free as possible.
1. Research New Banks
There are over 5,000 different U.S. banks and savings associations, according to the Federal Deposit Insurance Corp. (FDIC). In other words, if you wanted to, you could spend a lifetime comparing banks. While most people used to base their bank choice on their geography and community, that isn't a necessity anymore.
To decide which bank to switch to, think about what you're looking for in a bank. You'll want to consider a few factors, including:
- What are your financial goals? For instance, perhaps you'd like a bank with a high-yield savings account, one that offers far higher interest rates than what you currently have. Maybe you feel your current bank doesn't offer enough financial products beyond a checking account and you're interested in saving money in a money market account or a certificate of deposit.
- What type of financial institution do you want to work with? Do you want a small community bank where you may get to know the tellers and feel like you're a name and not a number? Maybe you'd prefer a credit union over a bank. Or do you think you'd be better off with a large bank that may have more financial products?
- Is avoiding fees important to you? If you worry about the costs you may sometimes incur to have a bank account, you'll want to take a look at whether your prospective bank charges monthly maintenance or service fees, or any other fees.
There is no right or wrong answer, but if you have a sense of what you're looking for, that may help guide you as you start comparing one bank to another.
2. Open Your New Bank Account
If you're opening a new bank account at a brick-and-mortar location, the staff can guide you through the process and answer any questions. Generally, whether you apply in person or online, you're going to need some documents to prove your identity. You can expect to be asked to furnish:
- Government-issued photo identification, such as your driver's license, a passport or a military or state identification card
- Your Social Security number or Individual Taxpayer Identification Number
- Proof of address
- Your date of birth
- Your contact information, such as your email or phone number
You may also need a little money to put into the account, like $25 or $100, though some banks allow you to start with a $0 minimum balance. But generally, once you offer up your information, depending on the bank, your account may be ready to use after a couple minutes—or a couple days.
3. Move Any Direct Deposits to Your New Bank
Now that you've got your new bank account open, it's time to start ensuring that money gets put into and taken out of it properly.
Alert your employer (and anyone who pays you money regularly) that you have a new checking account and routing number so that your paychecks can get put in the correct place. If you're a contract worker and you have a lot of clients, this could take awhile. But the important thing to remember is that if you are switching banks, you can keep both accounts open for as long as you want. You don't have to rush the process.
4. Make a List of Your Automatic Payments
Once you have money going into your new bank account, list out all the automatic payments you have. Go through at least a month (but ideally a year) of bank statements and look for any automatic payments. You may have automatically set up some bills to be withdrawn once a quarter or even annually, so the further back you can go, the better.
Some of examples of bills you may have on autopay include:
- Streaming services and other subscriptions
- Your phone bill
- Insurance payments
- Your mortgage or car payment
Not everybody automates every bill, but odds are, you have a number of creditors' websites to visit to change how you pay, and each entity might have a different way to set up payment.
5. Link Your New Checking Account to Your Savings and Retirement Accounts
Hopefully you're automatically sending money to a savings account and a retirement account. You'll want to remember to set that up so that the money comes out of your new bank account.
This may also be a good time to revisit how much you're depositing into your savings and investment accounts each month. You may be able to bump up your automatic savings and investment contributions without too much impact on your regular budget—a win-win situation.
6. Keep Money in the Old Account
When you think you're finished moving everything from the old bank account to the new one, it's advisable to keep some money in the old account for a while—for instance, a month—and monitor it daily to make sure there isn't a rogue automatic payment or check that you forgot writing that goes through.
That said, you may not want to keep the old account open for too long if you pay monthly maintenance or low-balance fees on the account.
7. Close the Old Bank Account
Once you feel comfortable that all of your financial commitments are now finished with your old bank, you can close the account. Generally, banks want you to call them or visit their branch in person, if they have one. As long as there aren't transactions in progress or any other outstanding activity happening, it shouldn't be difficult to close the account.
The Bottom Line
There's little doubt about it: With the time and effort involved, it can be a bit of a drag to change bank accounts. That said, your bank is holding your hard-earned money on a daily basis. If you're unhappy with your situation, you can change your financial institution. Take the time to do your due diligence and choose a new bank carefully, and you may find that you've found your forever bank and won't need to make another move.