Tuesday, June 14, 2016

How to Change Banks

Changing banks is a hassle, which is why it's so easy to stick with a bank out of inertia. (Banks love inertia. Inertia means business!) Once you have everything set up in one location, it can be daunting to change to another. While it can take several weeks to get everything fully switched over, it's really not that much work on your end. I've done it several times, so I have it down to a science.

First, why change?


Here are some reasons I've changed banks over the years:
  • I moved, and there were no convenient ATMs in my bank's network in my new neighborhood.
  • My bank was purchased and the parent company imposed new, worse policies.
  • After the global financial crisis, I felt squicky about doing business with a national bank that had made headlines for their bad behavior.
 

What do I look for in a bank?

Right now, here are the features I consider reasonable and standard for me personally:
  • Credit union. I prefer to do business with credit unions than banks. Credit unions are member-owned, so they are more likely to have policies that benefit the members.

  • Free savings and checking account. When so many institutions offer free accounts, I don't see the point in paying a monthly fee. I will consider accounts that have a fee, but waive it if I do things I would do anyway (such as set up direct deposit or keep a minimal amount in my account).

  • Decent interest rate on the savings account. I'm not interested in rate-chasing (anymore). Rates are so low right now that any difference is miniscule. Still, I'd rather see a 1% return on my savings than, say, 0.1%.

  • Convenient ATMs, which means either a widespread ATM network or ATM fee reimbursement up to at least $15 (about 5 ATM visits per month).

  • Local location. I do have one purely online account, but I also like to maintain one account in a local branch for those occasions when I need to do something in person, like get a certified check or a medallion signature guarantee or something. It doesn't come up terribly often, but when it does, you're pretty much out of luck if you don't have a brick and mortar bank to turn to.
 

Changeover Checklist

  1. Research & choose your new bank or credit union. I created a spreadsheet where I listed the features above, and then checked off each institution that had the features I wanted. It sometimes took some digging to confirm, for example, the conditions for free checking, but it was good to make sure of it before I changed over. Just as the carpenter's mantra is "Measure twice, cut once," my mantra when changing banks is "Google twice, open an account once."

  2. Open an account at your new bank. The initial form will usually be online. (I would only consider banks where it's online, since not having an online account opening form generally means their online banking will be terrible.) You'll need to set up an initial deposit, which you can mail in by check or transfer from your old bank. In most cases, a bank representative will contact you in a day or two for more documentation, like a picture of your driver's license for their records. You might also have to mail in a signature.

  3. Redirect your direct deposit to the new bank. The process for this varies depending on how direct deposit is set up at your job. Sometimes you can fill out an online form (like if your company uses ADP), but sometimes you have to fill out a paper form with your HR department and give them a cancelled check.

    You might also want to seed your new account with some money to get started by setting up a transfer from your old account, but don't transfer all your money over yet! You probably still have bills coming out of your old account and you'll need to cover them. This is probably the slowest step, as it might take a pay cycle or two for this change to take. Keep an eye out on your next couple paychecks.

  4. Start using your new bank for day-to-day purchases once you have some money in there, and you have received your debit card, ATM card, and paper checks (if you ordered/need them).

  5. Cancel all your automatic bill payments at the old bank, and set them up again at the new bank. If you can afford to keep both accounts seeded with enough money to cover your bills, you can make the switch whenever you like. If you're closer to the edge, you'll want to make sure your paychecks have switched over before you begin having bills deducted. You might want to turn off autopays for a month or two and do things manually just to make you set each payment to deduct from the correct account.

    When you cancel bill pay, make sure to fully delete your old account information. You won't want to use it again after you close your account, and having it saved is a mistake waiting to happen (don't ask how I know).

    It's helpful to make a list of all the places your banking information is stored, so you know what to change. Most online merchants require credit card or Paypal, not direct banking information, so you don't need to update your checkout information unless you change your credit card. But don't forget to change over:
    • Rent or mortgage payments, if you make them directly from your account
    • Utility bills, ditto
    • Loan payments (e.g. student loans, car payments, medical bills)
    • Credit card payments
    • Paypal
    • Financial aggregators (Mint, Personal Capital, YNAB, Quicken, etc.)
      Now is also a great time to take stock of your automatic payments and make sure you still need all of them.  
  6. Close your account at the old bank. In most cases, there's no rush to do this, so make sure the other steps are fully completed and you have confirmed that your income and key bills are changed over. Try to use the new bank exclusively for 2-4 weeks. If there's no activity at your old bank account in that time, you're ready to close the account.

    Some banks have an online process for this, and if the bank is brick-and-mortart and local, you can always do it in person. If all else fails, you can send a letter with your name, account number(s), and signature requesting that the accounts be closed. When you receive confirmation that the accounts are closed, feel free to cut up any debit/ATM cards, shred checks, and unsubscribe from their emails.

    You're done! You're banking with oil now.

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