Switching Banks Can Be a Big Pain. Here’s How to Make It Easier

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Life is full of tedious tasks, from getting your oil changed to updating your address after a move. Also on that list? Changing your bank. 

There are plenty of reasons why switching banks can be useful: a better interest rate, more user-friendly online or mobile app options, or simply to consolidate your accounts in one place.

But the process itself requires some planning and close attention to your personal finances. You may need to review past bank statements, update your monthly subscriptions, and reach out to your employer to update your direct deposit information.

Here’s everything you need to know:

How to Switch Banks 

If you’re looking to switch to a new bank or credit union, take these steps to simplify and streamline the process: 

Choose your new bank

Any new account you open should help you move closer to your financial goals. When you choose a new bank, look for the features that will simplify banking for you. That may be as simple as a robust mobile app, access to no-fee ATMs, or nearby bank branches. 

One common reason to open a new bank account today is to score a better interest rate for your savings. Online-only banks generally offer the best rates on high-yield savings accounts, as well as robust mobile banking platforms. These can make a useful addition to your existing checking account or traditional savings.

Another reason you may choose to open a second bank account is to support your community through local banks, including Black-owned or Black-led banks. Smaller community banks may not have the same features or technologically advanced features as online or large national banks, but opening an account can be a way to show your support with your dollars.

No matter what type of bank you choose, make sure it’s FDIC or NCUA insured, says Trent Porter, a certified financial planner for Priority Financial Planners, a financial planning firm in Colorado. “I’ve heard stories of fraud where somebody posted online that they’re a bank and they have great rates, and then people give them all of their financial information. And it wasn’t a legitimate bank, it ends up being fraud.” 

Open the New Bank Account 

Opening a new bank account can take as little as a few minutes. You’ll need your contact information including your name and address, a government ID, and your Social Security number. Some banks may ask for proof of your address or multiple forms of identification. 

When opening the new account, you may also be required to make an initial deposit to fund your account. This often requires and ACH transfer from an existing account, using the other bank’s account number and routing number. 

Set Up Your New Bank Account 

After you open your account, take a few steps to ensure that you can make purchases and withdrawals smoothly. Here are a few quick reminders of banking features to consider: 

  • Set your online username and password for online banking 
  • Download the mobile app
  • Order a debit card
  • Transfer recurring transactions, any money, and incoming deposits from your old bank

Update Your Automated Payments

This is one of the most important steps of opening a new bank account.

Automated payments are one of the biggest banking conveniences, and can help you stay on top of monthly payments. But when you switch bank accounts, it’s important to make sure you update your bank account information for any regular payments that may be affected — from credit card payments to gym memberships to your workplace direct deposit, and more. 

“The biggest thing and the most difficult is making sure that everything has changed [over],” says Ashley Coake, a certified financial planner at Cultivate Financial Planning in Radford, VA.

Carefully review past bank statements to find any automated transactions that come directly from your account. In fact, it’s best to review at least one year of your bank statements to account for transactions that may only happen once a year, says Coake.

Pro Tip

When applicable, it can be smart to pay for monthly subscriptions, and any online purchases, using a credit card. Credit cards provide strong protections against fraud, and may even offer rewards and benefits on your purchases, which you won’t get from linking your bank account directly.

What to Do With Your Old Bank Account

Once you update your banking information for automated payments and monthly or annual services — as well as your direct deposits — consider what to do with your old bank account. 

Depending on why you opened the new account, you may choose to keep both accounts open. If you opened a new high-yield savings account to earn interest, for example, you’ll still need your existing checking account.

But make sure you look out for any fees you might take on because of your changed banking situation. If the old account requires a minimum balance to avoid fees, you might be charged once you move money out of it to fund your new account. These fees may be only a few dollars each month but can add up quickly over time. 

If you’re not planning to use the account or don’t want to manage the account minimums or fees anymore, it’s best to close it. You can request to close the account through a bank representative. You may also want to dispose of old bank statements and cards associated with the account to reduce the risk of identity theft. Lastly, get written confirmation from your bank that the account is closed. 

Should I Switch Banks for Better Interest Rates?

Scoring a better interest rate is a great reason to switch banks. Savings account rates are steadily rising right now, making it a great time to consider a high-yield savings account from an online bank if you’re not already earning a competitive rate.

Generally, you can open a high-yield savings account online and set up automatic transfers from your existing checking account, or set your direct deposit to put a portion toward your savings each month. Before you decide on an account, make sure to compare options that may work best for you, and look for a bank with no monthly fees and low or no minimum balance requirements.

Does Switching Banks Affect My Credit Score?

Switching banks should not impact your credit score if you’re just moving your savings or checking balances to a new account. 

“Unlike closing a credit card, closing a bank account won’t impact your credit score unless you close the account with a negative balance,” says Coake. 

However, many other factors do impact your credit, like paying your credit card and loan balances in full and making payments on time. To maintain good credit, keep your credit utilization low and avoid spending more than you can afford to pay off. 

How Long Does it Take to Switch Banks?

You can open a new bank account in a few minutes online, but switching your payment information from different accounts and direct deposit providers can take longer. 

“It’s worse than updating your address in some respects,” says Coake, because it can be a lot of work — especially if you have several automated payments or link your bank account to many regular transactions.

To make the process as seamless as possible, prepare your documents ahead of switching banks and stay organized throughout the process, especially when you’re moving over automatic payments. And if you want your paycheck directly deposited into your new account, check with your workplace to see what the process is and how long it may take for the change to take effect. 

Be careful, too, not to close your old account before you have these automated payments and direct deposits securely switched over.  

How Many Banks Accounts are Too Many?

The right number of bank accounts for you will vary depending on how you manage your money and your financial goals. 

Sometimes, you may get more value from different types of institutions — an online bank for high-interest savings, and a large national bank for convenience checking, for example. If you plan to keep multiple accounts open, make sure you can manage the fees and automatic payments that come with each account. 

“It all comes down to personal preference and just being able to keep track of it,” says Porter. Opening multiple accounts means you must be organized enough to manage minimum balances, fees, and account information for each account. “Is it really worth it?” Porter asks. “And is it worth the risk of you complicating your financial situation?”

The Bottom Line

Switching banks can be a smooth process if you’re organized and keep track of everything coming in and out of each account. If you do plan to close your account at your former bank, make sure you’ve updated all your recurring transactions, payments, and deposits with your new account information before closing the old account. And to keep transactions from slipping through the cracks, consider leaving some amount of money in your old account for a few months to cover any transactions you may have forgotten about.

“Make a plan, write it all down, and that will make your life a lot easier for switching over,” says Porter.