How to painlessly switch banks

Bank of America announced last week that it will soon begin charging its customers a monthly fee for using debit cards. Other banks are considering similar moves in order to counter new federal regulations that cap the fees banks can charge merchants for debit card transactions. In a recent AP-GFK poll, 66 percent of Americans surveyed said they would consider switching banks in light of such a move. But switching banks comes with a few pitfalls.

Seven steps to bank-switching success

Below are seven steps to take in successfully changing banks without encountering unexpected fees or other repercussions.

1 – Find the right bank for you

This requires first determining what you want in your new bank. What services do you need? What services do you not need? Does the account charge more in banking fees than you earn in interest? Are the locations convenient for your day-to-day needs? Do your research to determine which bank or credit union best serves you and your needs. BankRate.com, Google Adviser and MoneyRates.com all have helpful online tools to compare banks’ fees and services.

2 – Open the new account

This needs to be done before closing the old account to avoid any lapse in service. It also gives you time to get your new debit card from your new financial institution. Richard Barrington of MoneyRates.com  recommends letting the two accounts overlap for an entire statement period.

3 – Stop using the old account

Let any outstanding checks, automatic payments and charges clear to avoid fees and overdrafts.

4 – Transfer direct deposits to the new account

Communicate with the payroll department where you work so your paycheck is directly deposited to your new account. You will need to supply all the new banking information, including account and routing numbers.

It is advised to wait an entire pay cycle before moving on to step 5.

5 – Transfer any automatic payments to the new account

Contact any creditors that use direct billing and give them the new banking information. Don’t forget insurance premiums or IRA contributions.

6 – Close out the old account in writing

Simply taking out all your money will not, in most cases, automatically close out an account. You still could be charged fees, which could in turn incur overdraft penalties due to the zero balance. Closing the account should be done in writing to leave a clear paper trail. Specify the closing date and the account number. Make a copy for yourself and keep it in your records.

7 – For your security

Finally, shred your unused checks from the old bank and and destroy any debit cards.

Sources

Daily Finance
eHow
MoneyRates.com