Switching Banks? Step By Step Guide and Tips
There are many reasons for wanting to switch banks. Maybe you’re unhappy with your current bank because of poor customer service, maybe you’re relocating, or maybe your bank has been acquired by (or is merging with) a competitor that you don’t particularly like.
Not too long ago, switching banks was a simple thing. After all, the worst that could happen is that you’d probably have to pay a penalty for early withdrawal if you were closing a CD. As for current and savings accounts, all you had to do was open the new ones at your new bank of choice, do a little monitoring to make sure you wouldn’t have any bounced checks, and then close the former accounts after completing the switch.
I wouldn’t go as far as saying that switching banks was as easy as switching toothpaste brands, but it certainly was easier then, compared to now. A growing number of banks have set themselves up as one-stop financial service powerhouses, providing a wide array of services: checking and savings accounts, money market accounts, CDs and IRAs, credit cards, home loans, home equity loans and lines of credit, direct deposit, online bill pay, investment services, insurance, and so on. The real clincher, though, has been the widespread push for automation.
There’s one good reason why banks are pushing automated services like direct deposit and online bill payments; once they’re set up, a customer is between 70% to 80% less likely to switch to a competitor, according to Gartner Inc. If you pay a host of bills with automatic withdrawals — mortgage, insurance, cable, vehicle loan and the like, and direct deposit of your paychecks or Social Security payments, you will rightfully cringe at the thought of closing a bank account to move to another financial institution. As a result, banks lose around 15% of their customers annually on average, says Celent Communications.
Every company that debits or credits your checking account has to be given the new account information, including bank routing numbers. They need your signature, so you have to send written notice (although some companies are beginning to offer an e-signature option). You also must notify your old bank. The “automatic” part of automatic debits apparently doesn’t extend to notifications of switching banks, so you may need to keep the old checking account funded an extra month or two to ensure payments are made.
That means it might just be too much work to leave your bank.
From the banks’ perspective, this is both a blessing and a curse, since the reasons that keep their clients from jumping ship are the same ones that make it harder for them to steal clients from the competition. Some banks are now trying to make it easier for customers (of other banks, of course) to switch, and have created switch kits, which take account holders through the process.
The process typically involves 4 steps:
Opening and funding your new account
That way you can write checks and make ATM withdrawals without interruption.
Moving your direct deposits
To establish or transfer direct deposits, you need:
* Your new checking account number and routing number
* A completed direct deposit request form
* Your employer or institution’s address and phone number
You can get the direct deposit form from either your new bank’s website or from your employer.
Moving your automatic payments
To cancel or to transfer automatic payments from your former bank account to your new bank account, you need the following information:
* Copy of your latest statement with your billing information
* Your new checking account number and routing number
* A voided check from your new checking account
* Former bank account information (for canceled payments)
* Complete an automatic withdrawal transfer or cancellation form. Check your new bank’s website for this form.
Closing your old account
If you’ve arranged for direct deposit of pay or benefits, don’t close the old account until you’re sure the next scheduled payment will go into the new account. This way, you will not get hit with fees for checks that bounce after you close the account.
If you’re changing addresses, give your old bank your new address and phone number in writing. Your bank might need to contact you after you close your account.
Be sure your financial records at home make clear that your account was closed. Otherwise, you or your heirs might worry later that there’s money forgotten in an old bank account and waste time trying to recover it. And if you have anything in your former bank’s safe deposit box, clean it out and return the keys.
If acceptable, you can use an account closing request form from your new bank. The form should contain: your name, phone number, and address, along with your former bank’s name, address, and account number.
Alternative option: BankSwitcher©
BankSwitcher’s website puts it best:
* BankSwitcher is a tool to help you switch banks by:
* Analyzing your banking activity to find transactions that you’ll need to switch (i.e., Direct Deposits, automatic payments).
* Compiling instructions and forms to switch those transactions to a new bank — using our directory of over 1500 Billers and Depositors.
* Creating your personal Switching Checklist (PDF format) that you can print and use when you find a better bank.
No matter how you slice it, switching banks is a fairly involved and time-consuming process. Fortunately, increased competition is forcing banks to make the process (a little) easier. In most banks, customer service will walk you through the process and even make the necessary phone calls to retrieve the necessary information. Before taking action though, consider the costs of time and gas to find a bank most convenient to home, work, shopping or in between on a major road.
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