How to Switch Banks Online

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Switching banks has become increasingly common as more online banks have popped up that offer easy access and sometimes better interest rates. 

If you’re thinking about changing banks, it’s a relatively fast and painless process. 

Keep reading to get a full breakdown of how to switch banks online. 

Switching banks: A step-by-step guide 

Are you thinking about leaving your current bank for greener pastures? Here’s what you need to keep in mind.

1. Have a good reason for ditching your old bank

Before you part ways with your current account, think hard about why you’re doing it. Unless you have a good reason, it might not be worth the hassle.

Good reasons to switch banks

Poor customer service

Some banks are just bad at providing customer service. In today’s customer-centric world, this is almost unfathomable. But it happens all the time.

Customers who feel slighted by their bank for getting hit with unnecessary fees, having to deal with rude agents or uncovering a bank error that does not get corrected have every right to sever ties. 

Customer service is a critical part of banking — and customers should always feel like number one. 

Lower fees

High monthly fees can be complicated to deal with, especially for customers who have difficulty maintaining minimum balance requirements. 

Banks that aren’t reasonable about monthly fees simply aren’t worth working with. If you can find a bank that charges lower fees — or ideally no fees — and that offers protection from overdraft fees with linked accounts — go for it.

More ATM locations 

Banks should offer an abundance of ATM locations or at least waive fees when using another institution’s ATM. 

Don’t feel like you have to settle for poor or expensive ATM access. 

Modern offerings

If your bank doesn’t have online bill pay features or doesn’t connect to services like PayPal or Zelle, it’s probably time to open a new checking account somewhere else.

In this day and age, it’s critical to look for a bank that offers modern digital experiences, including mobile apps, mobile check deposits, and more.

Questionable reasons to switch banks

Better interest rates on checking account or savings accounts

You may notice that a rival bank is offering a slightly better interest rate. However, the chances are that the interest rate is so low that it may not even be worth your time making the leap. 

The only time it might make sense to switch is if you’re making the jump from a traditional bank — one that offers next to no interest — to a high-yield savings account (HYSA) offered by an online bank. 

If you’re considering going from one HYSA to another to chase a slightly better rate, keep in mind that interest rates change often. So if you’re otherwise satisfied with your bank, you should probably just continue using it. 

After all, the last thing you want is to give another institution your Social Security number and driver’s license information only to find out the hard way that it’s not so great, either.

Limited time offers

Banks often run special promotions to attract new customers. For example, a bank may promise $250 for opening an account. 

Always read the fine print before taking a bank up on this offer. Frequently, the offer isn’t so great once you look at the details. 

For example, you may have to spend a certain amount of money or keep your money parked with a minimum balance, or you may have to set up recurring transfers or direct deposits. 

What’s more, promotions aren’t lasting. Once you collect the money, you may wind up with worse service than you were already getting. 

Learn more:

2. Shop around for a new account

If you have a solid reason for ditching your bank account, the next step is to start looking around for a new bank.

Here are some features to keep in mind as you narrow down your options.

Mobile app

The bank should have a robust mobile app, giving you easy access to banking services from an Android or Apple device. 

Not all banks offer mobile apps, so it’s essential to check beforehand if you’re looking for mobile access. Don’t expect any old bank to offer this because many older and smaller banks may not.

Locations 

Decide whether you want to select a bank with physical locations or if you’re comfortable doing all your banking online. 

Many banks today are online-only, meaning they don’t have brick-and-mortar locations. These banks typically offer much higher interest rates. 

However, the tradeoff is that you can’t go anywhere for in-person support when you have an issue or require guidance.

Automatic bill payments

Your new bank should make it fast and easy to make automatic transactions and manage them over a central dashboard. 

This should be a dealbreaker when signing up for a new bank, so definitely check to make sure the bank offers this.

Security

You’ll also need to investigate the bank’s overall security features. This may not be something you automatically consider when switching banks, but it’s pretty important. 

Banks should offer full encryption for all services and multi factor authentication during login. What’s more, banks should provide real-time monitoring for fraud prevention.

It’s also a good idea to scope out online reviews to see if the bank has a history of data breaches or security violations. 

Learn more:

3. Switch banks

Once you find a new bank that aligns with your core needs, it’s time to move forward with that institution. 

Decide if you want to close your old account 

Make a decision to ditch your old bank for good or keep it open. There’s no right or wrong answer here. 

If you decide to keep your old account open, make sure that you don’t get hit with any fees and that you don’t lose track of your access and account number. It’s also crucial that you cancel any automatic payments. 

For example, suppose you forget to cancel an automatic utility charge and leave a low balance in the account. In that case, you might wind up in a situation where your account balance goes into the negative. This means paying hefty overdraft fees and potentially even damaging your credit score if you don’t swiftly rectify the situation. 

Also, some banks will reactivate a closed account if it receives automatic payments or deposits. 

Transfer your funds

Next, you’ll need to go through the process of funding your new bank account. This should be as simple as linking your old bank to your new one through a routing number and account number and processing a transaction. 

You may even be able to have the bank do it automatically once you’re up and running. In some cases, all you might need is your old account information.

Adjust automatic payments 

During this process, it’s critical to change any automatic payments that you have from your old bank. Otherwise, the companies you need to pay won’t be notified that there is nothing in the old account. Not only could this interfere with ongoing services, but it could also lead to missed payments and account shutdowns if you’re not careful. 

Here, you’ll want to go through your old statements and make a list of all your recurring payments. Some banks will also let you see all of your recurring payments from one location. 

Set up direct deposit

Don’t forget to tell your employer that you’re switching banks if you’d set up direct deposit. Go through HR and process the new information. 

Keep in mind that there may be a delay when switching banks. Work with your HR department so that you don’t miss any payments in the meantime. 

Tips for switching banks online

Switching banks isn’t hard, but it does require some due diligence to make sure you go about the process correctly. 

For the best results, here are some other things to keep in mind. 

Look for reputable vendors

When it boils down to it, you need to educate yourself about your new bank before you switch.

If you’re not familiar with the new bank, do some investigating. Make sure that the bank is reputable and comes with solid reviews from customers and third-party watchdog groups. 

There are a lot of scams on the internet, and it’s not always easy to tell if a bank is legitimate. You should also be very careful when doing business with foreign banks online, as they may not be protected by the Federal Deposit Insurance Corporation (FDIC), which insures up to $250,000 in qualifying accounts. 

Not all banks offer debit cards 

Many online banks are truly online-only, meaning they don’t offer debit card access.

With these types of banks, if you need cash, you have to transfer your money to a checking account to access the money. You can’t just walk up to an ATM and swipe to receive cash.

This can be a pain, especially because some banks require a few business days to transfer funds. 

Determine these points ahead of time and make sure you’re comfortable with the level of access that the bank offers before you sign up for its services. 

Form a budget

If you’re switching banks thinking it will change your financial luck, you need to rethink your strategy — simply having a new bank won’t correct poor financial habits like excessive credit card usage. 

Instead, you need to get your spending under control. Stop wasting money on things that aren’t truly necessary, such as expensive clothes or frequent trips out to restaurants. 

Basically, you need a budget! Banks don’t typically offer budgeting tools, so you may need to look elsewhere for support.

If you need help forming a budget, look to tools like Mint, You Need a Budget (YNAB), and Personal Capital.

Learn more:

Frequently Asked Questions

What is a credit union?

A credit union is a type of financial institution that is member-owned. As a result, it typically offers higher interest rates for checking and savings accounts — and lower interest rates for loans. 

That said, not everyone can join a credit union. Typically, membership is only available to folks associated with certain groups — like professions, schools, church groups, and community organizations. 

Deposits held at credit unions are protected by the National Credit Union Administration (NCUA) for up to $250,000, just like the FDIC insures banks. 

Can switching banks affect your credit score?

Switching banks will not impact your credit score. Banks also don’t check your credit history when you open a savings or checking account. However, they will look at your overall banking history to ensure that you’re in good standing before giving you an account.

The Bottom Line

Because of the current market, interest rates shouldn’t play a huge role in your decision to switch banks (unless you’re switching from a traditional bank to an HYSA that offers a much better rate).

Instead, consider switching if your current bank is lacking in service. Some of the top features to consider are online banking quality, customer service, fees, and mobile banking. 

Financial consumers use banks for everything from paying for daily expenses to long-term financial security. It’s a good idea to have a bank that you like using — and one that you trust.

Additional Disclosures: Millennial Money has partnered with CardRatings and creditcards.com for our coverage of credit card products. Millennial Money, CardRatings and creditcards.com may receive a commission from card issuers. This site does not include all financial companies or financial offers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.

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