How to Switch Banks in 5 Easy Steps

If you’ve been banking with the same financial institution since you were in high school, you might be curious about your other banking options. Whether you’re looking for a new high-interest savings account or are fed-up with your current bank’s costly fees, here’s how to switch banks in just a few steps.

Step 1: Compare other financial institutions

These days, there are many options when it comes to where to open a bank account, aside from traditional big banks, like Chase and Bank of America. Determine what type of bank account you want to open (e.g. checking account, a savings account, certificate of deposit, etc.)

Compare products from conventional banks, local banks and credit unions, and online banks, too. Each type of financial institution has its pros and cons. 

A big bank might offer convenience by offering a robust app and multiple branches nationwide, but it might charge high maintenance fees. On the other hand, an online bank may offer low or no account fees and a high deposit annual percentage yield (APY), but not have the one-on-one, in-person support you’d find at a brick-and-mortar institution.   

What to look for before opening a bank account

When evaluating your account options, make sure to take note of fees, like maintenance fees, overdraft fees and other fees that might add up. It’s also good to keep an eye out for benefits that the account might offer, like:

• High APY. A high APY can help you earn money on your deposits.

• Low or no fees. Avoiding fees is always ideal. 

• Low balance requirements. You’re not required to provide and keep a high balance in the account.

• Welcome bonus promotions. New bank customers may be offered a cash bonus, if you meet certain account requirements.

• Accessibility. Ways the bank makes it easy to deposit and withdraw funds from the account.

During this step, it’s helpful to think about why you’ve decided to move away from your current bank. This insight can guide you toward what you really want from your next financial institution.

Step 2: Check the new account’s requirements

When you open a bank account with any institution, it will likely have requirements that customers must abide by. You can generally find this information in the account’s terms and conditions or bank disclosures.

For example, it might only waive an account’s monthly maintenance fee if you keep a $1,000 account balance at all times. Similarly, you might be required to make an initial deposit of a certain amount upon opening the account, or have a limited number of free withdrawals per month.

Make sure you’re clear on all of the fine print with the new account to avoid future surprises. If a requirement is still unclear, don’t be afraid to ask a bank representative for clarification. 

Step 3: Open a bank account

After you’ve compared different products across different banks, and fully understand the requirements of your chosen bank, it’s time to open a new bank account. Refer back to the requirements you reviewed when opening an account so you’re prepared with all the necessary information and paperwork.

Whether you’re going into a physical branch to open an account or opening one online, you’ll want to have a few basics on hand to fill out an application:

• Your full name

• Address and phone number

• A federal- or state-issued I.D. (e.g. Driver’s License, Passport, etc.)

• Your Social Security number

• Your initial deposit in a bank-authorized method (e.g. check, cash, etc.)

If your application is approved, you should receive your new account number. Depending on your new bank and the account you opened, you may also receive informational pamphlets, a debit or ATM card, or a starter set of checks. 

Step 4: Reroute automatic deposits and payments to the new account

Now that you have your new account set up, it might feel tempting to close your old account, immediately. Hold on!

Before taking that final step, review all of your old account’s transactions in the past year. Find any recurring automatic payments from the old account for bills and subscriptions. Slowly migrate the payment method for each of those bills to your new account. If you decide to do this all in one sitting, just make sure you have enough funds in the new account. The last thing you want getting hit with an overdraft fee.

If you have any direct deposits set up from your employer or freelance clients, you’ll also want to update your bank account information through your company’s Human Resources department or with your clients’ accounting teams.

Step 5: Close your old bank account

The final step is closing your old bank account. Before doing so, make sure that your automatic payments are processing correctly through the new account, and that you don’t have any pending checks under the old bank account. 

Also, settle any outstanding fees that you owe your old bank. This helps avoid being entered into ChexSystems, a credit reporting agency that tracks unpaid deposit account debt, bounced checks and suspicious banking activity. 

Once you’re sure all activity is done on the old account, ask your bank to close the account. You may need to sign paperwork to make this request official and to ensure you won’t continue to be charged fees for inactivity.

Knowing how to switch banks the responsible way can help you keep your money management running smoothly during the transition. It can take a few days, but at least you can feel more confident that your transactions and deposits are in order.