Before You Change Banks
You can switch at any time, but you might not need to
Sometimes things don’t work out. If you’re not banking at the right institution, it may be time to change banks. Perhaps you’re leaving because of customer service issues, or you’ve moved to a new location and you need a local bank. Whatever the case, make sure you know what you’re getting into before you make the switch.
Is it Worth It?
OK, so you’re dissatisfied with your bank. You may be angry, disappointed, and earning subpar interest rates in your savings account. But does it make sense to change banks? Consider sleeping on it before you act. You can change banks any time you want. But doing so is a process, any mistakes will cost money, and you may not be any better off after the switch.
If you’re switching for higher savings account rates, run some numbers on a to find out how much more you’ll really earn. Also, remember that your savings might not earn any interest for a few days while you switch banks. Is the extra interest worth the time it will take to change?
Just add an account: If you just want a boost in interest earnings, you might not need to change banks entirely. Instead, open a new account and keep both accounts open. Online bank accounts, which tend to pay the highest interest rates, are an excellent choice for money that you won’t spend immediately. Some banks even allow you to make payments while earning interest, so you don’t need to transfer funds back to your “main” bank.
If you want to change banks to avoid fees, rule out the alternatives first. Start by letting your current bank know that you’re unhappy with the costs and ask what your options are. They may have a variety of products (levels of service) available that you were not aware of. Alternatively, qualifying for a fee waiver may be as simple as setting up direct deposit into your account.
Need a More Convenient Credit Union?
If you use a credit union and you’re motivated to switch because of a geographic move, you might not need to change banks. Many credit unions participate in shared branching, which allows you to use branches of other credit unions for deposits, withdrawals, and other services (at no charge).
Evaluate the Options
If you have your heart set on making a change, you need to find a replacement bank. Take your time here and choose well—you don’t want to change banks often because of the time it takes and the opportunity for mistakes. Things may have changed since the last time you opened an account, so keep an open mind. Be sure to consider a variety of candidates, including:
You lose access to a lot of valuable information when you change banks. For starters, you won’t be able to search through your old account’s history. If you ever need to research a transaction or prove that you paid for something, there’s a lot of value in having a long transaction history. Download everything you need after your last transaction hits the account.
Be sure to:
- Download official statements. Those may help you document assets for a home purchase, and they should also have a transaction history.
- Get images of important checks (you may request copies from your bank if it’s been more than a few months since the check cleared).
- Download or export transactions to your personal finance software for easy searching, sorting, and categorizing.
You also need to manage the account closing process carefully. You can change banks whenever you want, but it’s ideal to do it when you can devote the time to completing all necessary tasks. A summary of steps is below, but it’s best to follow our complete checklist for changing banks:
- Open the new account and link the old and new accounts so you can move money easily.
- Get organized: List your monthly expenses (and any less-frequent expenses) that you pay from the account automatically. Fund your new account and start paying those expenses from the new account as soon as you’re able to.
- Set up direct deposit into the new account so you don’t need to transfer funds between accounts.
- Triple-check that everything is working correctly and that you’re not going to miss any payments. Once you’re certain that everything is properly set up, feel free to close your old account. You may be able to request a closure by phone, or you may need to send a letter.