How to Switch Banks: A Step-by-Step Guide

But after you’ve made the decision to switch, the actual process of transferring funds from one account to another is more complex than simply hitting a button.

Your old bank has worked hard to integrate itself into your daily life. “The ability to do the direct deposits, the ability to do the auto debits … it causes people to keep the business at the bank,” says Bill Schretter, a certified financial planner at Allworth Financial, an education-based fiduciary financial planning firm. “It makes it difficult (to switch).”

In order to ensure a smooth transition from one bank to the next, there are a number of steps experts advise you to take.

Here’s how to switch banks:

The first step to switching banks is to open an account at your new banking institution. At many banks, this process can be completed online by filling out a form with your name, address, contact information, driver’s license number, employment details and other information. You’ll learn how to access your account and get a new debit card for your checking account.

You’ll also need to make an initial deposit into the new account. “I would put about two months of expenses in the new account to start setting up the new auto-payments and bill payments for the coming months,” says Tara Unverzagt, president and senior lead planner of South Bay Financial Partners, a flat-fee-only financial planning organization.

Look at whether your new bank offers a “switch kit.” That’s a resource some financial institutions make available to help you transfer your money and sever ties with your old bank. To find one, do an online search for your bank’s name and the term “switch kit” or ask a customer service representative.

If you’re opening a standalone savings account, this step, plus closing your old savings account (see more on closing accounts below), might be all you have to do. With a checking account, however, switching banks can be more complicated.

Next, review your bank records, noting regular bills and expenses that are automatically deducted through your bank’s bill-pay service or via an individual company’s payment tools. Don’t forget to look for monthly mortgage payments or rent checks, your electricity bill, water bill, gas bill, gym membership fees, credit card payments, beer-of-the-month club dues and whatever else you regularly have automatically deducted from your account checking account.

Don’t only review a single month’s worth of expenses, experts say. Also take note of any quarterly, annual or semiannual bills that automatically ping your account. For example, you may have insurance payments, sewage fees, health care expenses and other funds that are automatically withdrawn less frequently. Looking at a full year’s worth of expenses is intense – but it should help you catch everything.

One last check experts recommend: Make sure you’ve used up any rewards points at your old bank. “If you have reward points on the card, you have to actually use that up before you close that account,” says Schretter. Don’t let your reward points go to waste.

As you review your regular expenses, start to redirect automatic payments and direct deposits to your new bank account. How you switch over automatic payments will depend on whether you previously paid your bills through the automatic bill-pay system at your old bank or through each individual company’s bill-pay tools. You’ll want to make sure each bill is set for payment from the new account, and keep an eye on your regular bills throughout the first few months of the switch.

To redirect any automatic deposits, such as your paycheck, you’ll likely to have to fill out a form with your employer. It may take a month or two for this to take effect. Do not close your old account until you see your direct deposits are going into your new account.

When getting set with your new bank, opt to link your checking and savings accounts. That way, you can set up automatic transfers between the two accounts to facilitate funding an emergency fund, saving for a vacation and accomplishing other savings goals. Connecting these accounts can also help if you opt-in to overdraft protection services.

It might take a month or two for new deposits and bill payments to link with the new bank account, so keep both accounts funded for at least two months. “Having the cash cushion left in the old bank is a way to help protect from overdraft fees,” says Charles Sachs, certified financial planner and chief investment officer at Kaufman Rossin Wealth, a financial planning firm.

Keep in mind that you may have to continue paying any monthly service fees or low-balance fees while you juggle two accounts.

Once you’ve gone through the process of transferring automatic payments and deposits, it’s time to officially bid adieu to your old bank account.

You may have to send an official letter requesting account closure and submit certain proof of identification, so make sure to understand the process involved and follow the steps. If a brick-and-mortar location is close by, it might be worth heading over to make sure you’ve met every requirement. Beware: Some banks may charge a fee for closing. You’ll also want to cut up or shred any debit cards or checks associated with your former banking institution.

“Make sure you get either a last statement or a confirmation that the account is closed and keep that proof for at least three years,” says Charles H. Thomas III, certified financial planner, founder and president of Intrepid Eagle Finance, a faith-based financial planning firm. “Just in case something comes up.” Once your confirmation is in, congratulations! You’ve officially switched banks.

How difficult it is to switch banks depends on the number of automatic transactions and account features you have set up on your old account. Downloading statements, canceling overdrafts and rerouting direct deposits all take time.

When going through your transaction history to redirect payments, don’t look at just one month’s worth of statements. You may have semiannual, annual or quarterly automatic payments set up on that account.

Once you’ve done your research and opened a new bank account, redirecting automatic payments and direct deposits may only take a few days. You should still keep your old account open for another month or two to ensure all your automatic payments and deposits redirect correctly.

It makes sense to switch banks if interest rates aren’t competitive, you’re paying too many fees, or if your current bank doesn’t offer a service you want.

Keep in mind that it’s harder to build strong relationships if you are switching banks frequently. “I think banks look more favorably and they’re ready to go to bat for you more when you have a longer relationship with them,” says Julia Lilly, founder and wealth advisor at Ryerson Financial, an advice-only financial planning firm.