Financial Education

April 24, 2018

There comes a moment in everyone’s life when it’s time to move on. In the case of your relationship with your bank, that time might come after your current financial institution closes the branch that’s closest to your home. Or, it could come after your bank starts charging an additional recurring fee.

Although people often want to change banks, many don’t because they aren’t sure where to start or what to do. Some figure it’s too difficult to switch, so they stay where they’ve been. If you think it’s time for a change and have been wondering “How hard is it to switch banks?” here’s how to switch banks and a few reasons why you might want to do so.

Reasons to Switch Banks

You don’t have to be unhappy with the services your bank provides to want to change things up. In some cases, it might be that your life has changed enough that the bank you’ve been working with no longer meets your needs. Here are a few other reasons why you might consider switching banks:

  • You’ve moved: While some banks have locations in multiple states or multiple locations across a single state, smaller banks might only provide service in a limited area. That means if you have to move, you might also have to switch banks as part of the moving process.
  • Your bank has closed locations: In some cases, maybe you’re not the party who’s moved. Due to staffing issues or cost concerns, banks do have to close branches from time to time. If the location most convenient for you closes and you suddenly find you need to drive 20 minutes to the next-nearest branch location, it might be easier for you to switch banks.
  • You got married: First of all, congratulations! Second of all, getting married or otherwise financially committing to a romantic partner can be the ideal time to change banks or, at the very least, open a new joint account together.

  • The interest rates on accounts aren’t so hot: You want to get the most from your money, which can mean that switching to a bank with a better interest rate on savings accounts is the way to go. Alternatively, if you’re considering borrowing money for a mortgage or other type of loan, you might find that a neighboring bank offers lower interest rates than your current one.
  • The customer service isn’t the best: How your bank treats you matters. If you’re regularly on hold with customer service for long stretches of time or if you don’t get a friendly greeting each time you go into a branch location, it might be worth finding a new bank to work with. Remember: you want to find a bank that lets you know you’re welcome here, every time you pay a visit.
  • The bank doesn’t offer the services you need: Some banks are getting more sophisticated and can provide a range of conveniences, such as online banking, mobile banking and digital payments. Some banks also offer a more extensive range of services than others, such as checking and savings accounts, loans and wealth management. It could be that you’re not getting the full range of services you need from your current financial institution and that making a bank change will streamline your life.
  • The fees are high: Why pay high fees to one bank when another bank charges less?

How to Switch Banks: Your Step-by-Step Guide

Once you’ve decided changing banks is the best option for you, you might find yourself asking, “How do I switch banks?” or “How hard is it to switch banks?”The answer is, “Not very hard at all.” Here’s your step-by-step guide to changing banks.

1. Find a New Bank

Before you head to your current bank to close your account, it’s essential to have a new bank lined up. You don’t want to shut down your existing account without a plan in place for your current funds, your direct deposits and any automatic payments you have set up each month.

Choose your new bank carefully. Ideally, it should be better or more convenient for you when compared to your current financial institution.

What to Look for in a Bank

Finding a new bank is going to involve some research. Here’s what to look out for when picking your new bank:

  • Services offered: Make a list of what you need or want from your new bank. Are you merely looking for a new checking account or do you want to be able to save money in a certificate of deposit or potentially take out a mortgage soon? When considering the services offered by a bank, think both of what you need today and what you’ll need in the not-so-distant future so you can avoid having to change banks yet again in a few months or a year, when your financial needs change.

  • Fees charged: Also, pay attention to the fees the bank charges for accounts and other services. Do they charge a monthly maintenance fee for every savings account they offer or is there a way to waive the fee each month? Do you need to have a minimum amount in your account at all times to avoid a charge? If so, is the minimum an amount you can comfortably leave as a cushion or will you find yourself dipping below the minimum balance on a regular basis? Make a list of the fees the new bank will charge and compare them to the fees at your current institution to see if you end up saving money or not.
  • Branch locations: With more and more banks offering online or mobile banking options, the physical locations of a bank might be less of a concern for some people these days. But it’s still nice to be able to go to your bank and speak to a real, live person from time to time when needed. Take a look at the branch locations for a new bank and compare how close they are to your home or work. It’s also a good idea to learn where the bank’s ATMs are located and whether it will be difficult to access an ATM when you need cash. Another thing worth considering, especially if you are on the road frequently, is whether the bank has ATMs out-of-state or if it participates in an ATM network that allows you to use other banks’ machines without paying a fee.
  • Technology features: Online and mobile banking can make it easier than ever to bank-on-the-go or without having to visit a local branch. But pay attention to what those features offer you. Can you deposit checks with the mobile app, for example? If you have to send money to a relative or friend, can you quickly transfer funds over from your account or not?
  • Insurance: In the U.S., the Federal Deposit Insurance Corporation (FDIC) insures the accounts at thousands of banks. If you have an account with an FDIC-insured bank, up to $250,000 of your money (per depositor, per bank) is protected in case the bank fails or otherwise goes under. For your peace of mind and the safety of your accounts, it’s essential to confirm that your bank is FDIC-insured.

  • Reputation: One last thing to consider when looking for a new bank is its reputation. Has the bank been in the news lately for scandals, for example? If you look at reviews online, are they mostly positive and do people seem to have good things to say? Another way to get a sense of a bank’s reputation is to ask your friends or family members who have had accounts there if they’d recommend it or not.

2. Open a New Account

After you’ve found a bank that ticks all of the boxes and seems like a good fit for your needs, the next step is to open an account with that bank. You’ll want to open the new account before you close your old one. That way, you have somewhere to transfer the money from your old bank when you finally close your current account.

If it’s been a while since you’ve switched banks or opened a new account, keep in mind that doing so these days usually requires a bit more paperwork than in the past. You’ll need:

  • Your driver’s license, passport or another form of photo identification
  • Your Social Security number
  • Your U.S. citizenship/resident alien status
  • Routing number and bank account information from your existing account

It’s also a good idea to find out whether you’re able to open the account online or if you need to visit a branch in-person to do so. PeoplesBank lets you open several accounts online, such as a checking or savings account and some types of certificates of deposit. Some accounts require you to have an existing checking account with us already.

One last thing to do when opening a new account: Verify what you’ll need for the account. For example, you might need to make a minimum deposit to establish the account and you might need to leave a certain amount in your account to avoid a monthly fee. To get off on the right foot, make sure you’re clear on what’s expected of you (and your money) from the start.

3. Identify Your Monthly Expenses

At this point, you should still have the account open at your old bank. Now it’s time for the fun part. Review your statements for the past year and make a note of any regularly-occurring, automatically-deducted expenses. You’re going to want to switch those over so they get pulled out of your new bank account.

There are two ways to handle monthly expenses while you transition from one bank to another. Option 1 is to cancel the automatic payments from your old account, pay the next round of bills manually and then set up automatic payments from your new account once you’ve gotten your first direct deposit or payment into that account.

A second option is to have the automatic payments complete one last cycle, then cancel them after the most recent payment. You’ll have to make sure you have enough money left in your old account to cover the amount of your last round of bills. After that final round, but before the next payment due date, be sure to change the payment information so that it reflects your new bank account. Again, you’ll want to make sure you have enough money in the new bank account to cover the second round of bills.

When switching over your regularly-scheduled payments, it’s a good idea to look back over the entire year so you’re sure you don’t miss anything. For example, you might only pay your auto insurance twice a year or you might have a subscription that gets automatically deducted once a year.

Here are a few expenses you might have set to be auto-paid by your bank:

  • Gas/electric
  • Cable/internet/phone bills
  • Water bill
  • Mortgage or rent payment
  • Netflix or other streaming service subscription
  • Newspaper/magazine subscriptions
  • Insurance (auto, health, life)

4. Change Your Direct Deposit

If you still get paper checks from your employer, you can skip this step. Otherwise, you’ll want to change the direct deposit at your job so your pay ends up going into your new bank account instead of the old one.

To do that, you’ll want to pay a visit to HR at your job. They should give you a form to complete with your new bank’s routing number and your account number. They might also ask you for a voided check from your new account. When you complete the direct deposit form, ask the HR team how long the change takes to make. It might be finished by the next payday, but it could take longer.

5. Balance Your Old Checkbook One Last Time

Once you’ve received your last direct deposit in your old bank account and all of your remaining bills have been paid, it’s time to take a look at what’s left, if anything, and pull that money out. You can either write yourself a check from your old account to your new one or transfer the funds electronically.

6. (Finally) Close Your Old Account!

After the money’s gone from the account, you don’t want to leave it open. Doing so can mean having to pay hefty fees or other charges.

How you close the account depends on the rules of your old bank and your personal preferences. You might be able to close the account by writing a letter to the bank, providing instructions for any remaining funds. Some banks might require you to visit a branch in-person to close an account. If you do that, it’s a good idea to contact the bank first and see if they require you to bring any identification or other documents.

When you do close your account and switch banks, make sure you get a letter or document from your old bank confirming the closure.

If you’re ready to switch banks, PeoplesBank makes it easy. Open an account with us online today and remember — you’re welcome here.


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