Switching banks? Our checklists of what to consider

Friday, October 28, 2011

Here are some things to consider when switching banks:

If you’re going to switch banks, try to choose one you can be happy with for a long time. Think about what’s most important to you in a bank and narrow the search down to those financial institutions that come closest to meeting all your requirements. There are a number of things to consider.

Security The FDIC (Federal Deposit Insurance Corporation) insures bank deposits up to $250,000 per depositor, per insured bank, for each account ownership category. The NCUA (National Credit Union Association) does the same for credit union accounts. Visit www.fdic.gov or www.ncua.gov to find out if your money is covered if the institution you’re considering fails.

Accessibility Choose a bank or credit union with branches nearby if you want to be able to walk up to a teller or access a safe deposit box. If you’re content to do your banking online and via ATM, you can get great deals from Internet-only banks. You’d have to deposit any paper checks by mail or by transferring their images electronically using your scanner or your smartphone and an app.

Account costs Account costs include things like monthly maintenance fees, online banking fees, debit card fees, funds transfer fees, and per-check fees. Most banks will waive fees if you use direct deposit, maintain a minimum balance or do all or most of your banking online or by phone and ATM. There’s no guarantee your new bank won’t raise its fees, but Internet banks, community banks and credit unions may be less likely to do so.

ATM locations and fees Make sure the bank or credit union you choose either has a conveniently located network of fee-free ATMs or that it reimburses your foreign (non-network) ATM fees. Find out if there’s a reimbursement limit—up to $20 in fees or up to six ATM transactions per month, for example.

Online and mobile banking Most financial institutions offer online and mobile banking, though Internet-only and very large banks will offer the most robust features and capabilities. These include easy website navigation, up-to-the-minute online transaction history, online and mobile bill pay, e-bill, automatic recurring payments, account alerts, online account transfers, an easy-to-use mobile banking app, and digital check deposits. If you’ll utilize all or many of these tools, online and mobile banking belong at the top of your priority list.

Interest With interest rates so low, how much you earn on your checking account balance or on a small linked savings account should not be at the top of your priority list. However, all other things being equal, you may as well get the highest rate you can. Generally speaking, you’ll find the best rates at online-only banks. Credit unions typically pay more than the large national banks. Compare “annual percentage yield” (APY). Find out if the interest-bearing checking account you’re considering requires a minimum balance.

Policies and practices If you’re moving your account because you don’t like what your bank has been doing—from giving exorbitant executive bonuses to aggressively foreclosing on unemployed homeowners—consider a bank or credit union’s record of social responsibility, community support and ethical business practice before choosing a new home for your money. An online search will yield news, reviews and company statements that will help you make a decision.

How to switch banks

Click here to download this fact sheet in PDF format.

Switching banks may sound time consuming and stressful, but it doesn’t have to be. Moving your checking account to a new financial institution—one that charges lower fees, offers more features, delivers better customer service or has a business philosophy you can respect—can be accomplished in seven steps.

1. Open a new account at the bank or credit union you choose. Know what the minimum initial deposit requirement is and how you’ll fund it—cash or check, a credit or debit card, or a wire transfer from another account. Set up an overdraft protection plan linked to a savings account, credit card or line of credit.
2. Order new checks and a debit card. If your new bank or credit union doesn’t offer free checks, shop around. Mail order check printing services typically offer lower prices. You’ll need a canceled check if you are employed and want your paychecks deposited automatically into your new account.
3. Set up electronic transfers between your old account and your new one. This will allow you to move money between the accounts as needed to cover payments, debits and checks during the transition. Establishing the connection can take a few days.
4. Set up online banking and online bill pay. Visit your new bank or credit union’s website and follow the instructions for setting up online banking. From there, you can add the names, account numbers and addresses for everyone you pay using online bill pay. Download the app if you plan to bank or deposit checks using your smartphone.
5. Move automatic recurring payments from your old account to your new one. The best time to do this is right after the bill has been paid. Make sure there’s enough money in the new account to cover the next payment even if you haven’t received your first direct deposit by then. Update online and other accounts, such as PayPal or a Christmas Club, that are linked to your checking.
6. Move direct deposits to your new account. Fill out new direct deposit forms with your employer, pension administrator or anyone else who deposits money for you. (Government benefits recipients can find federal agency contact information at www.GoDirect.gov.) You’ll need the account number and the routing number (the first nine digits at the bottom of the check) for your new account. It can take anywhere from a couple of weeks to a month for the transfer to take effect.
7. Close your old account when you’re sure that all pending transactions have cleared and that automatic payments and direct deposits have begun for the new account. A monthly maintenance fee may be imposed on a formerly free checking account once the balance drops below a minimum level or direct deposits have ceased. Check with your old bank in 30 days or so to be sure there are no outstanding fees and no remaining balance.

Click here to download this fact sheet in PDF format.