But the reality (at least in the age of the online bank) is that switching accounts isn’t all that hard.
Five minutes is generally all it takes to open a new account with an online bank. Closing an old checking account is a little complex, but if you know what you’re doing you have nothing to worry about. The key is to do everything in the right order and to wait to the very end to close your old bank account.
Step #1. Find a New Bank
If your existing bank is charging you too much or not providing good customer service, it may be time to leave. Before you go, you need to search for a new bank. Banks differ from one another in many different ways, including account types, fees, customer service, and access to mobile banking. Read our article on “How to Choose the Right Online Bank” for tips on how to compare online banks.
Step #2. Lay Groundwork for Leaving Your Old Bank
The act of switching bank accounts requires some delicate handling. There are economic consequences to being “unbanked” or “underbanked.” Don’t close your old checking account until you have opened a new one. However, if you know you’ll be leaving your old bank within a few days, early preparation can help avert delays.
Here are a few ways to prepare for leaving your old bank:
- Use cash. Withdraw enough money to live on until you open a new account, stop charging things to your debit card, and stop writing checks.
- Monitor your account. Check to see that all previous payments have cleared.
- Notify check recipients. If a payment hasn’t cleared, be sure to let the recipient know. Having a check bounce can be embarrassing, but it can be easily avoided if you tell your recipient to hurry up and cash that check.
- Play by the rules. Until your account is actually closed, the normal rules still apply. If your bank charges fees for dropping below a minimum balance, make sure you stay above it.
Step #3. Open a New Bank Account
Opening a new bank account is very easy if you’re switching to an online bank. For a complete step-by-step guide, read our article on “How to Open an Online Bank Account.”
To open an online checking account in the United States, you must be a US citizen or resident alien, and you must be at least 18 years old. Some online banks require a small initial deposit, which you can make by wire transfer from your old bank account.
Your new online bank will ask you for the following:
- Name, address, and contact details.
- Social Security number.
- Scanned copy of a valid driver’s license and/or state ID.
- Information about your employment, such as occupation, employer name, and level of income (not all banks ask for this).
Step #4. Move Over Direct Deposit and Bill Pay
This is the trickiest part, but it is crucial to get this done before closing your old account. Make a note of all the direct deposits coming into your old account and all the automatic payments coming out of it. Move each one over to your new account. Time it so that you don’t end up missing any payments and causing yourself any additional hassle.
- Direct Deposits. Bring your new bank routing number and account number to the HR department at work. Ask them how long it will take to process the change. If they tell you they won’t be able to do it in time for your next payment, make sure to keep your old account open until then.
- Bill Pay. Go into your old bank account and cancel all Bill Pay payments. Then go into your new bank account and add Bill Pay payments.
- Automatic Debits. If you have any payments that get debited directly by a company, contact that company and give them your new account information.
- ePayments. Don’t forget to edit your banking information on PayPal or any other online payments systems you use on a regular basis.
Step #5. Close Your Old Account
Your old bank might try to lure you back with discounted rates or incentives. If you’ve come this far, it means you’ve done your due diligence and gone to the trouble of preparing to switch banks. Banks can be persuasive, but stay strong: if they really wanted you to stay, they would have treated you better earlier.
If you’re closing an account with a regular bank, you might have to make a trip to a physical branch. If you’re closing an account with an online bank, you may have the option of closing the account online. Some, but not all, banks charge fees for closing an account. Whoever your old bank is, call to find out how the process works and read through the fine print to make sure you don’t get charged any hidden fees. Don’t forget to transfer your remaining balance to your new bank account.
One last thing: ask for a letter to confirm your account closure. Put it in a safe place with your financial records. Remember where it is—you may need proof of account closure if someone tries to debit your old account.