Many people open their first bank account as a kid wherever their parents bank and never make a change. But the banking industry itself has changed a lot since most of us were kids and sticking with the same bank may no longer be the best option for you.
Reasons to switch
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Location: These days, many people don’t need to visit their bank in person, but if you do, and you’ve moved somewhere where your old bank doesn’t exist or is inconvenient, it may be time to switch. Alternatively, if you no longer need in-person banking, don’t limit yourself to local options.
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Fees: The average American pays $7.69 per month in fees, but there are a lot of no-fee banking options available.
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Rates: Many brick-and-mortar banks offer dismal interest rates on their savings accounts. You might be earning as low as 0.01% or 0.02% on your savings account. Today, there are options to easily earn more than 2%.
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Features: Consider specific features that streamline your financial life, like the ability to set up savings buckets and built-in tools to track your spending categories.
Just like in a relationship, even when you know it’s time to end things, the logistics of moving on can be intimidating. Follow these steps to smoothly leave your old account behind:
1) Open Your New Bank Account
The first step is choosing your new bank account and getting it set up. If you open an account online, the whole process could take as little as five minutes, especially if you are prepared with all of your personal information (address, social security number, etc.). Opening an account in person tends to take longer. If the bank needs additional time to verify your identity, it could take a few days to get a final response.
2) Audit Your Current Checking Account
To be thorough, print out your last year of statements from your current checking account and highlight any recurring charges or websites that are connected to it (if you’re tech-savvy, you can also do this in a spreadsheet to save paper). Your recurring charges likely include at least some of the following expenses:
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Rent
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Utilities
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Cable/Internet
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Cell phone
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Subscriptions
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Gym memberships
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Credit cards
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Paypal
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Venmo
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Cash App
Compile a list of the places where you need to switch the payment method over to your new checking account. To really get organized, note down the amount of the charge and when in the month it occurs so you can prioritize getting payment methods switched over. If looking at a whole year of spending feels overwhelming, start by at least reviewing the last three months of statements.
3) Set Up Your New Direct Deposit
Once you’ve identified the charges that need to be moved over to your new account, it’s time to get money flowing there. If you are paid through direct deposit, contact your HR Department to provide your new bank account and routing number. If you are paid by check, you can make the deposit into your new account manually.
4) Keep Cash In Your Old Account for a Few Months
Ideally, you should leave a few hundred dollars in your old account to cover any expenses that you forgot to switch over. Check the account at least once per month to see if anything unexpected was deducted. During this stage of the process, be mindful of any fees that you might incur on your old account related to minimum balance, number of transactions, or direct deposit requirements.
5) Close Out Your Old Account
After a few months have passed and you are fairly confident that there are no longer any charges linked to your old checking account, it’s time to close out that account completely. You’ll need to clear out any money left in the account. To do this the easy way, link your two checking accounts online and transfer the remaining balance from your old account to your new one. Then, you’ll likely need to call your old bank to close the account. If you don’t want to connect your accounts online, the bank may send you a check for the remaining balance or require you to come in person to clear out and close the account.
