The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.
How to Switch Banks in 7 Simple Steps
Moving to a new financial institution is sometimes necessary, but it doesn’t have to be hard. If you’re considering a banking change, check out this complete guide on how to switch banks. You’ll learn how to transition in seven easy steps, from finding a new bank or credit union to taking advantage of your new banking relationship.
How do you know when it’s time to switch banks? Is it the day you get hit with high fees? Maybe it’s the moment you realize the interest rates are too high for borrowing and too low for saving. Or perhaps it’s when you’re tired of feeling like a low priority to a big bank that puts profits over people.
There are many other reasons you might be considering switching banks: You want a higher interest rate on your savings account, you’re moving to a new area or you’re seeking more personalized customer service. Whatever your reasons for changing financial institutions, the process doesn’t have to be a hassle. With some planning and attention to detail, cutting ties with an old bank that no longer best serves your needs and opening accounts with a new financial partner can be easier.
By following a series of simple steps, you can have peace of mind knowing you’re not going to miss an automatic payment or direct deposit paycheck or complicate your PayPal or Venmo accounts. Use this complete guide on how to switch banks to make the transition to your new banking partner as seamless (and painless!) as possible.
1. Choose Your New Bank
When shopping around for a new financial institution, there are typically four types to consider. Which one you should choose depends on your monetary needs and goals:
- National banks: Commercial banks chartered by the federal government with branches all over the country (though many are decreasing their brick-and-mortar options).
- Community banks: Smaller banks that serve businesses and people in a particular (often smaller) geographic area. Like credit unions, they focus on building personal relationships with their customers.
- Online-only banks: Banks that don’t have physical locations for services and offer only digital banking.
- Credit unions: Customer-owned, not-for-profit institutions that offer the same security and protection as a bank, with some key differences One big difference is that banks have customers, while credit unions have members.
Every bank is insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. Credit unions offer the same security, in the same dollar amount, through the National Credit Union Association (NCUA).1
These different types of institutions have varied benefits, and there are many things to consider when choosing a new banking partner:
- Interest rates: Historically, credit unions offer lower interest rates on home equity loans, mortgages, auto refinance and home loans, and higher rates on investment and savings accounts.
- Fees: Banks often charge higher fees than credit unions in order to make money for their investors, and free checking accounts at banks often come with stipulations like minimum balance requirements. Fees for errors like overdrafts tend to be higher at banks, as well.
- Products and services: While some credit unions don’t have as many products as banks, CU’s like Desert Financial offer all of the products and services that banks have — plus a few others you might not expect!
- Accessible branches and ATMs: Big banks offer access to physical locations and ATMs, while credit unions might have fewer locations and more focus on digital banking. However, credit unions like Desert Financial have a unique collaborative relationship that gives their members access to nearly 30,000 ATMs worldwide through the CO-OP ATM Network.
- Online banking capabilities: The idea that credit unions can’t compete with banks in terms of technology and convenience is a commonly held belief, but it’s not true. Turns out credit unions are tech-savvy and are capable of offering mobile banking, contactless payments, mortgage loans and home equity lines of credit, all without you having to leave home.
- Minimum deposit requirements: Some banks require a substantial minimum deposit to open an account. Credit unions typically require a small deposit — for instance, Desert Financial Credit Union requires a minimum $25 savings deposit to become a member.
Tip: Some financial institutions offer services or switch kits to make tracking your accounts and transactions before your move even easier.
- Open an account
- Get started by setting up online/mobile banking, set up direct deposit and activate your debit card
- Make the switch by setting up bill pay and closing your old accounts
Ready to get started? Download a copy of Desert Financial’s Switch Kit
2. Track Your Transactions
Nobody wants to have their paychecks sent to an old account or have an automatic payment bounce. Prepare for a smooth transition to your new bank by going over the past year of your transaction history to make note of things like automatic payments, deposits and subscriptions.
Use this checklist to make moving your money easier:
- Direct deposits, including automatic deposit of paychecks, alimony or child support, recurring transfers from linked accounts and government benefit payments.
- Subscriptions, including recurring payments for gym memberships, streaming services, magazines, etc. (Keep in mind these fees could be monthly, quarterly or annual.)
- Linked accounts, and recurring transfers to any other accounts.
- Automatic bill payments, including utilities, credit cards, mortgage payments and student loans.
- Digital wallet and payment apps, including person-to-person payment apps like PayPal and Venmo.
- Bank services you currently use, such as mobile apps, email or text alerts and paper checks.
3. Open Your New Accounts
After you’ve chosen your new bank or credit union, opening an account is relatively simple. It can be done online in very little time, but if you’ve chosen a brick-and-mortar credit union, you could also choose to open your account over the phone or visit a branch. There’s a short list of things you generally need to open a bank account, including a form of government-issued photo ID (some banks require two), documentation of your physical address and enough funds to cover the opening balance. Find out what the required opening balance is for your new credit union beforehand.
You’ll want to open your new accounts at least two weeks before you close your old accounts at your former bank since it can take up to 10 days to receive your new debit card in the mail if you opened your account online or by phone. You can also take this time to do things like order paper checks, transfer safety deposit boxes, and set up online and mobile services with your new bank or credit union.
While you make those changes, think about the other products you might need from your new financial institution. They may offer some or all of the following:
- Free checking: There are ways to maximize the benefits of your free checking account, including enjoying the convenience of online banking, the security of overdraft protection and the reliability of direct deposit.
- Savings accounts: Your new bank or credit union might offer different types of savings accounts, from traditional savings accounts to savings certificates and money market accounts. Talk to someone at your new bank or credit union to learn more about the savings products they offer and choose one that helps you work toward your financial goals.
- Credit cards: Consider signing up for a credit card from your new bank or credit union if you want to keep everything together, consolidate credit card debt, find lower rates or get better rewards.
4. Set Up Online and Mobile Banking
Before making the final switch to your new bank or credit union, your new account needs to be accessible. You’ll want to have your new debit card and all your online accounts set up, including mobile banking apps, prior to using your new account exclusively.
There are numerous benefits to online banking: 24/7 access to your accounts and services, online bill payments and automatic check deposits, fast and easy fund transfers between accounts, and the convenience of being able to complete financial transactions from anywhere. With digital banking, you can check your balances from the beach with a simple “Hey, Alexa” or “OK, Google.”
If your new bank or credit union has a mobile banking app, you can download it and use it anywhere to:
- View your balances and transaction histories
- Transfer funds between accounts
- Make mobile check deposits
- Receive advanced security and fraud alerts
- Send money to a friend’s account
- Pay bills
- Apply for a new loan
- Locate branches and ATMs
Some mobile banking apps offer some services you might not have thought about. For example, Desert Financial Credit Union’s app features voice banking and a built-in budget feature.
Also, set up your digital wallet (a virtual version of your physical wallet that contains all your payment information) to make touchless purchases with a wave of your phone. Don’t forget to update your person-to-person payment apps (like PayPal, Venmo and Zelle) with your new bank information.
5. Move Your Money
After your new account is open and your digital ducks are in a row, it’s time to move all of your automatic deposits and payments to your new account, along with any recurring automatic bill payments. You can use the checklist you made earlier to double-check everything.
- If you have direct deposits of paychecks or income (including from businesses, investment earnings, government benefits, alimony or child support), make sure you redirect them from your old bank to your new account before you do anything else.
- Reschedule automatic payments to come out of your new account. You’ll also need to update any old account information with merchants such as your cable company, cell phone provider and credit card company. If you had recurring transfers between your checking and savings accounts, make sure you set those up between your new accounts, too. (This is a good opportunity to cancel any subscriptions you no longer use, rather than transferring those payments to your new account.)
- You can also use this time to do things like procuring a new safety deposit box and ordering checks.
- If your old and new banks use payment apps like Venmo or Zelle, that can be a fast and free way to transfer funds. You can also move funds from your old account into your new account via cash withdrawals and deposits, cashier’s checks or personal checks.
Pro Tip: It’s a good idea to leave your old account open with some funds in it for at least one billing cycle, just to make sure you didn’t miss any transactions or recurring payments in the transfer and to avoid any minimum-balance fees from your old bank.
6. Close Your Old Accounts
If you’ve double-checked and are confident all your automatic transactions have transferred to your new banking partner and any payments from your old account have cleared, it’s time to say goodbye to your old bank. You can do this in person, online or over the phone. If you’re going into a branch, ask the bank ahead of time what forms of identification they want you to bring.
Plan to switch on a day that will give you plenty of time between automatic transactions. If you don’t have any automatic transactions scheduled between the 15th and 25th of each month, for example, switch everything on the 15th so service providers like your insurance, mortgage and utility companies have time to update your payment information before the next due date.
Give your bank formal notice and instructions so they cease banking activity and direct them where to send any remaining funds. Your old bank will likely try to convince you not to leave. Be wary of enticing offers from your old bank – there’s a reason you’re switching! Some banks charge fees for closing an account, so ask whether there are any account-closing fees.
It’s also a good idea to request written verification from your old bank that the account is closed, in the event they allow a transaction to go through that results in fees. Some banks will reactivate closed accounts to complete a deposit or debit transaction. Asking your old bank about their reactivation policies, getting written verification of account closure, and making sure all your automatic deposits and payments have successfully rerouted before closing the account will help avoid this.
Lastly, destroy your old debit and credit card(s) and any paper checks you might still have from the old account. When your final statement arrives from your old bank, go over it carefully to check for any further deposits or payments you need to transfer.
7. Enjoy Your New Account
There’s more to your new bank or credit union than managing money. Now that you’re done with your old bank, learn more about your new financial partner and take advantage of their products and services to help you achieve your financial goals.
Many banks and credit unions offer a gamut of services including:
- Fraud protection: Some financial institutions offer identity theft monitoring, and many will send you text alerts if suspicious activity is detected on your account.
- Home, auto and personal loans: Credit unions traditionally have lower interest rates on these kinds of loans.
- Investment services: Many people tend to think of banks when seeking broader investment options, but credit unions are also capable of providing customized investment services, often in partnership with a global financial services firm.
- Insurance: Your new bank or credit union might have insurance representatives on their team who can shop around for you to find the best prices and coverage for your home, auto, life or business insurance — and you can often make monthly payments for the plans you choose from your account.
- Wills and trust services: Even if estate planning isn’t top of mind for you right now, your new bank or credit union might be able to help you create a will or trust to give you additional peace of mind.
- Financial education: Google results aren’t always the most reliable sources of information, and sometimes it’s hard to tell which financial advice to trust. Your new banking partner might have a trove of information and resources to help you navigate your money management.
Pro Tip: Some credit unions offer member rewards for doing more business with them, including annual cash back bonuses, complimentary custom checks, discounts on loans and services, free money orders and cashier’s checks, rebates of ATM fees charged by other institutions and free stop payments.
Double-check that all your automatic bill payments and deposits have been transferred by reviewing your new bank statements. Stay aware of overdraft penalties and monthly fees in order to stay on track and meet your financial goals.
If you’ve been with the same bank for a long time and you’re not making a major life change, you might be wondering why you should even consider moving to a credit union. But transitioning to a new financial partner can be a smart move if you’re able to:
- Get a higher interest rate on your savings and deposit accounts
- Pay lower or fewer fees
- Choose from a larger range of banking products and services
- Have access to more branch locations or a broader ATM network
- Receive better customer service and enjoy a more personalized experience
- Receive rewards like cash back, discounts or lower rates on loans and sweepstakes and scholarship opportunities
Switching banks could ultimately be the best option for maximizing your money and meeting your financial milestones. Knowing how to switch banks lessens the stress, and once you’ve shopped around for the best bank or credit union to meet your needs, it’s easy to transition to a new institution and work toward the financial future you envision for yourself.