If you are moving and need to change banks or simply dissatisfied with the service provided by your current bank, you may need to change your primary bank accounts to a different bank. When you do so, here are some considerations to avoid the gotchas and make sure you have a smooth transition. The last thing you want is to be charged a bunch of fees or miss auto drafted payments.
Setup your new account
First step is to get your new account set up with your new bank. Before you can begin your transition you need to have your accounts in place that you are transitioning to. Order checks. Get your debit card. You will want to have these in hand before you make the switch and it may take a few days or weeks to get them.
Review recent statements for your old account
Check your recent bank statements or look at your account online. Make a list of all of the direct deposit transactions and any automatic payments that are drafted from your account. I would recommend looking back at least 3 to 6 months since not all payments are monthly.
Change your direct deposit
If you currently have direct deposit set up to automatically deposit your paycheck into your old account, you will need to check with your payroll or HR department to find the steps to have this changed to your new account. Be aware that depending on your company’s systems it might require a few days or a payroll cycle or two for this change to take effect.
Change all auto draft payments
Now start working your way through that list and updating any payments that are auto-drafted from your checking to point to your new bank account. Again be aware that it may take several days for these updates to take effect so if you are very close to the payment date, it might still be drafted from your old account.
This is where it gets very tricky, especially if you don’t have much excess money in your accounts. You need to make sure you keep enough money in your old account to cover any payments or outstanding checks so you don’t get hit with over draft fees. At the same time you need to have enough money in your new account to cover payments that you have switched to the new bank. Depending on how close you cut it each month, you will need to manage this very carefully to make sure you maintain sufficient funds in both places.
Carefully keep track of any checks you have written against the old account that have not yet cleared. You have to make sure you keep enough money there to cover them to avoid bouncing a check.
Don’t forget online vendors
If you regularly make purchases with online vendors like Amazon.com, E-Bay, or others and have used your debit card to make those payments, your old info will probably be saved on the site. Don’t forget to change this before making your next purchase. If you have a PayPal account that is tied to your old account you will need to change that. If you have an online bill pay service you’ll need to update accounts there. If you use software like TurboTax and have had refunds direct deposited, you will need to remember to update this info when you next calculate your taxes. Consider any other places where that old account information may need to be updated.
Close the old account
Once you are certain all automatic activities have been changed and any outstanding checks or other transactions have cleared, you can now look at closing your account. Make sure you talk to your old bank and follow whatever their procedure is for properly closing the account. You don’t want to just withdraw your money and walk away. If the account was a joint account with a spouse or relative the bank may require both of you to be present to close the account.
You also want to be careful of the timing of when you close the account. If you anticipate a monthly interest payment on the remaining balance in your account, wait for the interest to be paid. In some cases you will lose any accrued but unpaid interest.
Be aware that some banks will charge you a fee to close your account. Also, if you had a large balance in the old account the bank might require a few days to transfer your funds to you.
Beware of “zombie” accounts
Some banks will re-open your closed account if a deposit or an automatic withdrawal is made after the account is closed. Not only might this result in you having open accounts you aren’t aware of, but some banks will charge you a fee for opening the account and then another fee for closing it again. This is why it is so important to make sure all automatic activities have been transferred to your new account.
If you have a legacy drawer don’t forget to update it with the new account information.
Get out the shredder
Make sure once the old account has been closed that you completely destroy any debit cards that were tied to the account. Also shred any unused checks or deposit slips.
Not as simple as it seems
If you are dissatisfied with your current bank or are moving and have to change, then by all means you should change banks. Just be aware that depending on how many automated transactions you have this might be a little more complicated than you expect and it will take some time. I would plan for at minimum a couple of months to make the transition and you will need to pay close attention to both accounts in the interim to make sure you don’t incur any unexpected fees or miss payments on any of your bills.
Have you been through the process of changing banks? Any other tips you can share?