How to switch banks

Switching banks isn’t hard to do — and a new savings or checking account could have a better interest rate or no ATM fees.

Elissa

Elissa Suh

Published June 10, 2020

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KEY TAKEAWAYS

  • Switching banks means transferring money to a new checking account or saving account and then closing your old bank account

  • First find a new bank or credit union (don’t forget to consider online banks) and open up an account

  • Reach out to payroll to change your direct deposit to your new bank account, and update any bill payment methods that use the old account as well

  • Close your old bank account only after everything has been set up with the new account

There are many reasons you might want to switch banks. Some banks offer better customer service or convenience than others. A checking account or savings account at another bank or credit union may have a higher interest rate, lower monthly fee, or tout other features that you don't currently have, like free ATM access, online banking, and more. Maybe you just prefer to support a different financial institution — a credit union, like your local community bank instead of a big bank.

The way switching banks works is that you’re moving your money to a new account at a new bank or credit union, and closing out the old one. Luckily, it’s not difficult to switch banks, but there are some steps you should follow to make sure the process goes smoothly. For example, you’ll also have to change your direct deposit or update any automatic payments with your new bank account or debit card. Not following these steps could cause a headache for you and might result in a missed payment.

In this article:

Step 1: Open a new bank account

Before you switch banks, you need to open a new account at a different financial institution. Most banks allow you to do this in person or online. You’ll need to provide some information about yourself and anyone who will jointly own the account with you. You’ll also need at least one form of ID, but the bank will not check your credit score.

(Learn more about what you need to open a bank account.)

Make a minimum deposit

Your new bank may require you to have a minimum balance when you open the account, which you can do with cash or check. If you're opening the new account online, as many people do, you can opt to transfer money electronically.

It is a good idea not to transfer everything at once. You want to leave enough money in your old bank account to avoid an overdraft fee or low balance fee (sometimes called a maintenance fee) if your account dips below the minimum balance.

A few tips for choosing a new bank account

Make sure you research the best banks and credit unions for your needs, as well as the types of savings accounts you want to put your money in.

Things you may want to consider when switching banks:

  • Interest rate (APY)
  • Minimum balance fee
  • ATM fees
  • Online banking
  • Mobile banking
  • Branch locations

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Step 2: Set up direct deposit and update automatic bill payments

If you have direct deposit or anything else linked to your old bank account, make sure to update them to avoid fees or other errors.You can change your direct deposit to a new bank by reaching out to the person in charge of payroll at your company. It can take a few weeks for direct deposit to get set when you change banks. During that time, your paycheck will still go to your old account. We recommend keeping your old bank account open until your direct deposit starts appearing in your new one. Otherwise, the deposit may be rejected and it might be a while until you get paid.

(Learn about how to set up direct deposit, the most secure and convenient way to get your money.)

Many people use their bank account to make recurring bill payments. If you switch banks, you’ll need to update your payment method with your new account number or debit card. Companies won’t know that you’ve switched banks unless you notify them.

Here’s a checklist of recurring payments you may need to update when you switch banks:

Step 3: Transfer the rest of your money

Once you’ve confirmed that direct deposit is active for your new account, you can transfer the remaining money over to your new account. Just as before, you can make an electronic transfer to your new bank, receive the money in the form of a check, or withdraw the money as cash. (If you haven’t already hit your minimum balance requirement at your new bank, then deposit the money as soon as possible.)

(Learn more about how to transfer money from one bank to another.)

Step 4: Close your old bank account

Now it’s time to close your bank account, but you will first need to pay any fees or claims you may have against your old bank account. You should also ensure your old account doesn’t have any pending charges, deposits, or money transfers.

Now you can finally close your old account. If you used an online bank, you may be able to close the account from the website, but a more traditional bank may require that you call or even visit a branch location. Some banks may charge a fee for closing an account.

(Learn more about how to close a bank account.)

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About the author

Personal Finance Editor

Elissa Suh

Personal Finance Editor

Elissa is a personal finance editor at Policygenius in New York City. She writes about estate planning, mortgages, and occasionally health insurance. In the past she has written about film and music.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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