7 Steps to Switching Banks

Are you satisfied with your current bank? I haven't been satisfied with our bank for a few years now, and shame on me for taking so long to do something about it. After a handful of horrible customer service experiences, I can no longer do business with the bank I've held my money with for more than seven years.

The Reason We Switched Banks

I'm not going to tell you where we used to bank, but let's just call them Fells Wargo. Over the past two or three years, they have very stealthily changed the terms on our bank accounts, adding requirements for minimum balances and putting limits on how often we can transfer to and from our savings account. Each time they change the rules, there's a $10 penalty fee that shows up on our account. The worst part is I don't recall ever receiving notices of the changing terms.

OK, they probably did, but shouldn't it be required that I sign something? I find it appalling that they can change the terms on which I originally agreed and proceed to charge a $10 monthly fee for what began as a "free" checking account. Thankfully I've been able to have some of these fees reversed, but at the extreme hassle of having to go into the bank, talk with a banker and switch account types - on two different occasions. When Kelsey noticed another $10 fee a few months ago, I had had enough.

So, we started the process of planning our escape from the grip of Fells Wargo. Can you think of anything worse you would want to do?

Switching Banks

7 Steps to Switching Banks

  1. Find a new bank
  2. Open a new account
  3. Deposit one month's worth of expenses into your new account
  4. Switch all auto-payments and direct deposits to the new account
  5. Wait for pending payments in your old account to clear
  6. Get a cashier's check for remaining balance at old bank
  7. Deposit cashier's check in new account

1. Find a New Bank

It can be tough selecting a new bank. Leaving the familiar in terms of online banking, ATM locations and policies can be scary. There were certain attributes we wanted in our new bank that needed to either be equal or an improvement over our previous bank. We chose a smaller bank close to our home, American Trust. They have a checking account that offers the following:

  • 3.01% APY* is paid on balances up to $15,000
  • Balances over $15,000 will earn 0.25% APY*
  • If monthly qualifications aren't met, you will still earn 0.05% APY*
  • Nationwide ATM fee refunds (up to $25*)
  • No monthly service charges
  • No minimum balance to earn rewards
  • $100 deposit to open account
  • Free debit card
  • Free online banking
  • Free e-statements
  • Direct deposit available
  • FDIC insured

*The rate is subject to change

2. Open a New Account

Opening a new account was pretty easy. I simply walked into the bank and asked to open an account. The above information was on their website, so I knew which account type I wanted to open. I think I could have even done this online, but I wanted to ask if the banker thought that the rewards checking would be the best account for us. After the kind lady confirmed it was, I was ready to open the new account.

The bank then sent us debit cards and a free box of checks. Although we didn't have any money in the account, it was important to have the debit cards and checks for the next few steps of the process.

3. Deposit One Month's Worth of Expenses into Your New Account

To me, this seemed like the most logical way to do it. We pulled the money from our emergency fund temporarily to make for an easy transition. After the money cleared into the new bank account, we moved to the next step in the process.

4. Switch All Auto-Payments and Direct Deposits to the New Account

I highly recommend setting up auto-payments on as many bills as you can. It makes paying bills a breeze, because... you don't have to think about it. We simply keep track on our budget when each payment is set to come out of our checking account and mark it as bolded when it clears the bank. Switching banks has been the only time I've regretted that decision. In fact, it's what has mostly kept us from switching banks until now.

Here are all of the auto-payments and direct deposits we had to switch:

I thought switching our auto-payments and direct deposits would be a cumbersome process, so I simply put up with being dissatisfied with our bank for years. But when it came time to switch, it really wasn't that much work. So long as you are organized.

A few things you'll need to switch your auto-payments:

  1. Voided check (or at least your routing number and account number)
  2. Logins to all of your bills' websites
  3. Necessary forms (we got our direct deposit forms from our HR departments at work)

Most of our bills' websites allowed for a quick form to be filled out and submitted automatically to make the change. Only a few of the bills we had didn't have the functionality, so we had to fill out a short form and send a voided check. To make this easy, I scanned a copy of a voided check and then simply attached or printed it each time I needed it. This saved a lot of time.

All in all, it took less than an hour total to get all of our bills and direct deposits switched.

5. Wait for Pending Payments in Your Old Account to Clear

This is where things can get tricky. You want to make sure that before you move to the next step that you don't have anything in pending status. For example: online purchases that haven't shipped yet.

Once we were sure we had nothing more coming out of our old bank accounts, it was time to close them.

6. Get a Cashier's Check for Remaining Balance at Old Bank

I went to the bank to get the cashier's check and also to ensure that they closed all of our accounts. At our old bank we had four accounts: joint checking, two personal checking accounts, and a savings account. With the new bank's policies, we earn more interest if we keep all of our money in one account. So, we'll just keep track of savings and personal money on our budget.

7. Deposit Cashier's Check Into New Account

All of the hard work behind us, all that was left was to deposit the cashier's check into our new rewards checking account and pat ourselves on the back.

What do you like/dislike most about your bank?

P.S. I've also heard good things about Perkstreet. Check out this recommendation from Christian Personal Finance.