Switch to a Better Bank in 5 Easy Steps

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Switching banks is a pain. You have to close accounts, research new banks, and rework all those automatic bill payments you've set up at the financial institution you'd like to leave.

But sometimes making the switch is the right move. Maybe your bank has raised its fees. Maybe it's closed the branches that operated near your home or work. And if you're moving, you might have no choice but to make the switch.

Yes, switching banks does take a bit of work. But it's relatively simple work.

If you need or want to switch to a new bank, follow this simple step-by-step guide. Doing so will ease any stress from jumping to a new financial institution.

1. Research a New Bank

Before closing any accounts at your current bank, make sure that you spend some time researching a new home for your money. Choose a bank that offers online bill pay and direct deposit, of course. You also want one that offers free checking and higher interest rates on savings accounts — relatively speaking, since interest rates are still near historic lows.

Customer service matters, too. Search for a bank that has plenty of ATMs near you and that still operates branches within a short drive of your home or office. You might also consider investigating a credit union or an online bank, both solid alternatives to traditional banks.

The key in this search is the checking account. Make sure you know exactly how your new checking account will operate. Is there a minimum-balance requirement? Are there fees if you make too many withdrawals during a month? How large of an initial deposit do you need to set up your new account? These are all key questions that you should answer during your research.

2. Open Your New Checking Account

Once you select a new bank, start the switching process by opening a checking account there. Do this before you close the checking account at the bank you are leaving. You might still need money in your old account to cover payments that haven't yet cleared.

To open a checking account, you'll need some basic information. You'll need to provide, of course, your name, address, and date of birth. But you'll also need to provide your Social Security number and one official piece of photo identification. Usually, this will be your driver's license. But banks will also accept an official state ID card or your passport.

Your bank will then require you to make an initial deposit into your new account. How big this deposit must be will vary by bank.

3. Cancel Automatic Payments at the Bank You Are Leaving

Once you've established a checking account at your new bank, it's time to cancel any automatic payments that you've set up at the bank you are leaving. Do this right away, so that your creditors don't try to take money out of an account that is either empty or has been officially closed.

Then set up the same automatic payments with your new bank. You'll need your bank's routing number and address and your checking account number to do this.

If you had signed up to have your paycheck deposited directly into your old account, cancel that direct-deposit arrangement, too. Then contact your company's human resources department to move your direct deposits to your new checking account.

4. Close Your Old Account — When the Time Is Right

You can now close your old account, if all of the checks you've written against it have cleared. Compare your check register against your online account to make sure.

If you don't do this? Any checks that have not yet cleared will bounce if your old account is closed. The companies that you were paying might charge you late fees if this happens. This danger is why it usually makes sense to wait at least a month after opening your new checking account before closing your old one.

5. Get It in Writing

When you're sure that all your checks and payments have cleared, you can officially close that old account. Doing this in person might be the best choice. That way you can instantly receive written verification that your account has been closed. You'll want this documentation in case your former bank reopens your account or claims that it was never shut down in the first place.

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