You may want to end the relationship with your bank for any number of reasons. It could be that you’re moving and you want the convenience of a bank in closer proximity to your new location. Or you’re not happy with your current bank’s product offerings or high fees. Or maybe its customer service leaves much to be desired.
Follow these steps to close your bank account and make a seamless transition to a new one at a different financial institution.
Open a new bank account
Before you sever ties, it behooves you to first choose a bank or credit union that will meet all your needs. If you’re interested in better savings rates, consider an online savings account, where rates are significantly higher than at most brick-and-mortar institutions. Bankrate has also compiled a list of the best checking accounts that may aid you in your decision making.
To lure new customers, some financial institutions offer so-called “switch kits,” consisting of a checklist and forms to send to depositors and creditors. This can help facilitate your switch to a new bank.
Transfer money to your new account
When opening an account, you generally need to deposit funds, but not always. Some banks require no money to open an account, but do require funding within a set time limit, typically 30 days, or the account will be closed. Other financial institutions require a minimum opening deposit to avoid fees or to earn a competitive interest rate.
Set up new recurring transfers and direct deposits
Reach out to your payroll department at work to set up direct deposit into your new account and note the date or dates when this will occur each month. If you’re getting dividend payments from a brokerage account or income from other sources that you want automatically deposited into your new bank account, be sure to notify the relevant parties of the change as well. They’ll need your new routing and account numbers.
Once your new account begins to get regular infusions of cash, notify all the creditors who were automatically pulling money from your old account of your new account numbers as well. These recurring transfers might include insurance payments, TV streaming services, a gym membership, charitable contributions, etc. It helps to review your bank statements from the past 12 months to see the monthly and annual bill payments that have been automatically deducted from your account.
Before closing the old account, make sure all transactions have cleared and that you have nothing pending from your old account that might cause a bounced check or overdraft fees. It’s a good idea to reconcile your check register with your statement to look for any outstanding payments.
Close the account
How long does it take to close a bank account? It shouldn’t be done the same day you open a new one. The entire process might take one or two billing cycles to ensure that you didn’t miss any automated payments. Once you’re confident that all transactions are taking place with the new account, transfer any remaining funds from your old account to your new one. You can do this either by writing yourself a check, getting a cashier’s check or arranging for an electronic transfer.
You can close the account online, by appearing at a branch in person, calling over the phone or writing a letter. Some banks will have you sign an account closing request form.
Get confirmation in writing
Be sure to get written proof of the account closure from the bank to protect yourself in the event the bank reopens the account. This might happen because of unforeseen billing errors or if funds are inadvertently directed to your account. A confirmation letter serves as proof that you did in fact close the account so that you will not be held liable for any fees that may occur if the bank reopens it.
Be sure to shred the old checks and cut up old debit cards.
What else to know
Be aware that some banks impose limits per day or per month on the amount that can be transferred electronically from one bank to another, and some may even impose a transfer fee. You can get around this by writing a check from your old account for the exact balance in that account and depositing it in your new account.
Regulation D imposed restrictions on the number of transfers that could be made from a savings or money market account to six per month. While the Federal Reserve has recently lifted these restrictions to enable savers to access their accounts more frequently during the pandemic, financial institutions are not required to adhere to the new rules. If you think you might require more frequent access to your savings, it would pay to find out about this before you make a commitment with a new bank.
Watch out for unexpected fees. To attract new business, banks sometimes offer a compelling introductory deal to open an account, including hundreds of dollars in cash. However these incentives come with strings attached, and if you close the account early, that money could be forfeited.
“Read the fine print,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “If you snagged a sign-up bonus when moving to your bank, they may reserve the right to claw some or all of it back if you close your account within a certain period of time.”
Featured image by Boston Globe, contributor for Getty Images.