How to switch banks: A step-by-step guide

There are plenty of reasons you might want to switch banks, such as earning a better interest rate, saving on fees or enjoying better customer service. The problem for many is willpower; it can look like a hassle to change banks. 

The process, though, isn’t as burdensome as it appears. 

How to switch banks in 5 easy steps

1. Find a new bank

Before you switch to a new bank, you’ll need to figure out where you’ll move your money. Your options generally include traditional banks, credit unions and online banks. Banks may offer many services and a nationwide footprint of branches and ATMs, while credit unions (nonprofits that are owned by their members) charge slightly lower interest rates on loans and pay higher rates on deposit accounts. Online institutions often provide better rates because they have lower overhead costs and need to provide a reason for long-standing traditional bank customers to switch their allegiances. 

When weighing your options, consider what’s important to you. Compare the following details at each institution:

• Reputation for customer service.
• Whether it’s federally insured.
• Branch and ATM locations.
• Online and mobile banking services.
• Services and products offered at each institution.
• Fees for deposit accounts.
• Interest rates on savings accounts.
• Special features or benefits.

Once you know what you’re looking for, consider reaching out to your current bank. 

“You might want to disclose the reason for closing the account,” said Michael Emancipator, vice president at the Independent Community Bankers of America. “[There may be] an alternative solution that would address your concerns or meet your financial needs.”

2. Make a list of recurring transactions

You may have money going into and out of your accounts on a regular basis. Making a list of these transactions can make it easier to update the payment information once you open a new bank account. Go through your checking and savings accounts to look for recurring withdrawals, deposits and payments. These may include:

• Direct deposits for paychecks, business income and government benefit payments. 
• Recurring transfers to linked deposit accounts, retirement accounts or investment accounts.
• Automatic bill payments for rent or mortgage payments, utilities, insurance premiums, credit cards and student loans.
• Recurring subscriptions such as streaming services and gym memberships.

Also look for places where you’ve linked your current bank accounts online. For example, if you pay for Amazon purchases through your checking account, then you’ll need to update the bank account information there once your new account is open.

3. Open the new bank account

You can open your new accounts once you’ve chosen a new bank or credit union. Depending on the institution, you might complete this step online, over the phone or in person. No matter which option you choose, you’ll likely need to provide the following information: 

• Name.
• Date of birth.
• Social Security number.
• Mailing address.
• Email address.
• Phone number.
• Identification, such as a driver’s license.

You’ll also need to tell the bank or credit union how you plan to fund the new account. Options may include cash, an ACH transfer from your old account or a certified check or cashier’s check.

4. Redirect your recurring payments

Now that you’ve opened your new bank account, you can start redirecting transactions that were connected to your previous account. The processing of switching accounts may vary with each provider.

For example, you may need to contact your employer’s human resources and fill out a form to change your direct deposit information, while your credit card issuer may just require you to log into your account and update your details there. 

This is where your list comes in handy. 

Go through it and start redirecting the transactions one by one. If you need other services, such as paper checks or a safety deposit box, then now’s your time to set them up. If you have paper checks connected to your old account, then you can cancel any refills and shred the remaining checks.

Enrolling in online and mobile banking can also help you manage your accounts from anywhere. Over the next month, monitor your new account to ensure your automated payments and deposits carry over.  

5. Close your old account

The last step in switching banks is closing your old account — but don’t rush it. It’s a good idea to store some money in your old account and keep it open for at least one billing cycle in order to cancatch any recurring transactions that you may have missed.

Once your transactions have carried over, contact your old bank and ask about closing your accounts. After completing the process, ask for written verification that the account is closed and keep it in a safe place. 

If your old bank allows any transactions to go through your old account, it may trigger fees. You can use the written verification as proof that you shouldn’t have to pay the fee.

The final step is looking through your last statement to check for any lingering transactions. 

Should you switch banks?

If you benefit from moving your accounts to a new bank or credit union, then it could be a good idea. Switching can offer certain advantages if the new institution:

• Offers a higher APY on your deposit accounts.
• Charges lower fees or interest rates.
• Provides more banking services and features.
• Has a larger ATM network or more branch locations.
• Offers more online services.
• Gives you a bonus for opening a new account.
• Has better customer service.

Ultimately, switching banks is a personal decision based on your priorities and preferences. 

“Some consumers might prioritize having a relationship with a community bank,” Emancipator said, “while others might be hyper price-sensitive or value convenience over personalized service.”

Determine what’s most important to you.

Consider credit unions

Banks and credit unions offer many of the same services and products, such as deposit accounts, loans and credit cards. The key difference is that banks are for-profit institutions, while credit unions are nonprofits owned by their members. 

To that end, credit unions often charge lower interest rates on loans and pay higher rates on deposit accounts. They also typically charge fewer fees and may have looser requirements for their products. For instance, a credit union may set a lower minimum balance requirement on a savings account. Credit unions also tend to score higher in customer service surveys. 

The main catch is that you need to qualify for membership. Strict credit unions can require you to belong to a specific geographic area or work for a particular employer, while others may simply require a one-time $10 donation to a local charity, which allows anyone in the country to join. You can find this information on the credit union’s website.

The other possible downsides are that banks tend to offer more services and more sophisticated websites and mobile apps.