Banking •

January 4, 2023

How to switch banks

Switching banks involves finding the right option for you and then making sure you update all bill payments and transfers. Here’s everything you need to know.

Switch to a new bank

There are many reasons to consider switching banks. Perhaps you’re unhappy with your bank’s customer service, or you’ve been paying too much in fees. Or maybe you’re not earning enough (or any!) interest on your savings and want to switch to a bank with a better interest rate. 

Whatever the reason, switching banks can feel intimidating. After all, your bank account is the foundation of your entire financial setup! 

This guide will go over how to switch banks in a stress-free way. Let’s get started.

How to switch banks 

Switching banks doesn’t need to be complicated, but it’s a process that should be approached with care. 

How to switch banks

First and foremost, you need a good reason to switch. Maybe you’re tired of paying monthly fees, or your current bank doesn’t offer the loan or credit card you want. 

Then, you need to find a bank that does fit your needs and wants. From there, it’s a matter of signing up for the new bank—and then taking care of any loose ends with your old bank. 

Let’s break each step down in detail. 

1. Consider your wants and needs in a bank 

What do you need or want in your next bank?

What to look for in a bank

Everyone will have a different answer to this question since everyone has different needs. For instance, the best bank for a college student will be different than the best option for a retiree. Here are some factors to consider when choosing:

Branch access: Do you want access to physical bank branches? If so, look for a bank or credit union with a presence in your local area. You might also want to check ATM network access to see how many ATMs you can use without paying a fee.

Account fees: All banks will have some fees, but they vary significantly. It’s usually best to avoid banks with monthly service fees; it’s best to look for a bank with reasonable fees in general. Credit unions often have lower fees than traditional banks while offering many of the same services. 

Account types: Which account(s) are you hoping to open? All banks will offer standard checking and savings accounts. But perhaps you want to open a high-yield savings account or a reward checking account, or even a retirement account. Check with the bank to see what types of accounts they offer. 

Interest rates: Banks charge interest on money they loan out, whether for a mortgage, a personal loan, or a credit card. The amount of interest can vary significantly depending on the bank and the borrower’s credit score. Look for a bank that offers competitive interest rates if you plan to take out a loan either now or in the future. Also, look for a bank that pays interest when you save money in a savings account. 

Online and mobile banking: Almost all banks and credit unions now offer both online and mobile banking, but the quality of their apps and websites varies significantly. In general, the bigger banks have invested more in technology and therefore have slicker user interfaces. 

2. Explore your options 

Did you know that there are over 4,000 banks in the US alone? Not bank branches—4,000+ actual banks! 

Types of banks

That might seem overwhelming, so let’s dial it back a bit. There are 2 broad categories to consider:

  • Local banks and credit unions which have branches in your area

  • Online banks, which don’t have branches and are often available nationwide

If you want access to a local bank branch, this will drastically reduce your options. Researching banks in your area and looking at customer reviews is a good place to start. 

If you don’t mind not having access to physical bank branches, online banks are often a great option. Many online banks have lower fees and/or better interest rates than standard banks because of their lower operating costs. 

In any case, you’ll want to look at the list of criteria in Step #1 above and use that to guide your decision on which bank to choose. 

3. Open a new account 

Next, it’s time to open an account with your new bank. This process varies a bit depending on the bank, but in general, you’ll need to provide the following:

  • Your name and date of birth

  • Your Social Security number

  • Your address and other contact information

  • Photo ID, such as a driver’s license or passport

  • An opening deposit

Bank accounts can typically be opened online or in person. If you open an account online, you may be asked to take pictures of certain documents—like photo ID—to upload securely. This is done to confirm your identity. 

It typically doesn’t take too long to open a new bank account, but it’s wise to carve out an hour in case it takes more time than expected. 

Most banks require an initial opening deposit. There might be a minimum, like $100. This deposit can be made using cash, check, or a transfer from another bank. You may need to make this deposit as part of the account opening process, or you may be able to do it after opening your account. In any case, you’ll want to make a deposit quickly so that you can start using your account! 

4. Enroll in online and mobile banking

Once your new account is open, you’ll be given an account number. You can use this number to set up transfers from other accounts and online banking access. 

Enroll in online banking

If you open your bank account online, your account will likely be created automatically. If you open in person, the bank teller can help you, or you can create an account on your own.

To enroll in online banking, you’ll need your new bank account number and a working email address. You’ll be asked to create a user ID and a unique password. 

Once you set up your online banking account, make sure that your bank account is properly linked to the online login. If you run into any issues, contact your new bank for assistance. 

You’ll typically use the same account you created for online banking access for mobile banking. The only difference is that you’ll download a mobile app to use. 

5. Update any automatic payments and transfers 

Now, it’s time to make sure your financial life keeps running smoothly by updating any automatic payments, transfers, payroll deposits, etc., to your new bank.

Here are some of the automatic transactions that may need to be updated:

  • Payroll deposits from your job

  • Automated transfers from other accounts (like your spouse’s account or your business checking account)

  • Automatic transfers to other accounts (like your retirement account or your savings account)

  • Bill pay for credit card bills, utilities, and other bills

  • Any other automatic payment or transfer

It’s wise to start with your income, then move on to expenses. If you are paid via direct deposit, you’ll need to update your bank account information with the human resources department at your workplace. 

From there, you move on to expenses. What bills do you pay out of your old bank account? You’ll need to update your bank account information for things like credit card bills, utilities, and anything else you pay out of that account. This is usually done on the payment side rather than the bank side. In other words, you’ll likely need to log into your credit card or utility account to update the bank account number you’re using for your payments. 

Once you’ve tackled all the obvious stuff, it’s a good idea to check for anything you may have missed. To do this, log into your old bank account online. From there, you can see a history of all the account activity. Look for any outgoing transfers or bill payments that you haven’t already updated, then take the necessary steps to ensure that they are taken care of. 

6. Wait a few months, then close your old account 

Once you have switched everything over to your new bank, you can close your old bank account. 

Close old bank account

This usually requires contacting your old bank to close the account manually. If you have any funds left over in that account, the bank can cut you a check or transfer the money to a new account. 

However, before closing your account, it’s a good idea to wait a few months. This will allow you to make sure that you successfully updated all the payments and transfers to your new bank account. 

Should I switch banks? 

Now you know how to switch banks—but should you? 

Chances are, if you’re reading this guide, you have a reason in mind for wanting to switch banks. Common reasons include wanting to save money on fees, get better access to local branches, or find better interest rates. 

Should I switch banks

Here are some reasons you might consider switching banks:

You’ve outgrown your current bank. Maybe you’re still with the original bank you opened as a teen. Or maybe you want access to a wider range of services and products than your current bank offers.

You’ve moved to a new area. Many banks operate regionally or locally and don’t have a physical presence outside of that area. If you move across the country—or even out of state—you might no longer have access to your bank’s branches. This might be a good reason to switch.

You’re planning to apply for a major loan. If you’re planning to apply for a mortgage, auto loan, or personal loan, it definitely pays to shop around for the best rates. And while you don’t necessarily need to take out a loan from your primary bank, many people prefer to do so to keep things simple. 

You’re heading off to college. If you’re a college student, you’re at a great time in life to get started on the right financial foot. You’re also navigating “adulting” for the first time, so maybe you could use a helping hand with the right banking solution. If this is you, check out Mos. Mos is a banking app specifically designed for college students’ needs, and it’s free to join! 

You’re sick and tired of fees. Many banks charge mandatory monthly fees just to use a basic checking or savings account. These fees can be frustrating and can overshadow any interest you earn on your savings. Switching to a bank with no monthly maintenance fee is a great way to save money.

You’re tired of earning just pennies in interest. If you’ve recently checked your savings account and realized how little money you’re earning in interest, it might be time to switch. Many banks pay as little as 0.01% interest—or just $0.10 per year on a $1,000 balance. If you switch to a different bank, you can earn a more reasonable interest rate of 1–2% on your savings. 

Conclusion

Switching banks can feel intimidating, but it doesn’t have to be! If you follow the step-by-step instructions above, you can switch banks quickly and easily. 

Are you a student? If so, check out Mos. Mos is banking for students; it offers a simple, fee-free debit card, cash-back rewards, helps to find scholarships, and much more. 

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