How to Transition to a New Bank Account

by Kevin on August 3, 2009

Last month we investigated and opened up a new high-yield rewards checking account. Instead of opening with our typical internet bank we found a local/regional bank.

We’re in the midst of getting everything transitioned over and I thought I might review exactly how we’re planning on doing this transition. Maybe you’re looking for a new bank and this will be useful. Maybe you’ll notice a glaring error in my plan and save me some time or money.

How to Move to a New Bank Account

1. Open new bank account

Obviously you can’t start this process without identifying a new bank to open an account with. We did our research and narrowed our choices down to two local/regional banks in our area. I would love to move to a credit union (we have two very close friends who work and promote credit union-ness), but none of the local credit unions could match the rates of the bank we ended up with.

You will need to fund the account during the opening process of course. We were able to open with just $50. Why just $50? Well…

2. Wait on new checks and/or debit cards

We opened our account with $50 because it takes a while to get the account “situated”. We had to wait on new debit cards (which came within a week).

I just ordered two boxes of checks online for $28. We don’t write a ton of checks — mostly to church — but we still need them. (And you better believe we got University of Tennessee checks. Again we write checks mostly to our church, so I’m hoping that will limit the number of people in Alabama that will try to cause major injuries to us over them.)

But we’re still not ready to completely switch over. It turns out there are several steps I had mentally dismissed in this whole process.

3. Make a List of All Automatic Transfers

We have a bunch of automatic transfers that come out of our ING checking account each month. Thankfully this is the only account with ties to other organizations. Nonetheless if we are going to move to this new bank our automatic payments need to come with us.

To make a list of automatic transfers just look over your account statements (or history for online bankers). Make a note of the various transactions over the last few months. I advise looking over the last several months because there may be some things that aren’t paid monthly. For example our trash service is paid every three months. If we looked back just one month we might miss the transaction.

Why make a list? If you forget about a transaction and that service provider (like our trash service) tries to deduct payment from an empty bank account bad things happen. Late fees, penalties from both the bank and the service provider, that sort of thing. We want to avoid that.

4. Set Up Automatic Payments with New Bank Information

Naturally once you have a list you will need to go to each provider and add the new bank account information. For us this includes two credit card companies, our mortgage company, the power and sewer companies, and a missions organization.You will need your bank account and routing number to set up the automatic payments.

5. Remove Old Bank Information from Automatic Payments

About this time last year I incurred my first ever set of bank overdrawn and credit card fees. At the time I called it my day of reckoning. I had a perfect record up to that point. (I also then proceeded to negotiate out of my fees.)

Here was the problem: I had started making my American Express payments through my ING Checking account rather than my local brick-and-mortar bank. I had set up the new (ING) information with American Express. I even had a few payments under my belt with the new account.

But I never removed my old brick-and-mortar account from American Express. And one day, not paying attention, I set up a payment from my old bank (which had very little money in it) to American Express. Fees and general pandamonium insued.

So don’t be like me! Remove that old bank account information as soon as the new one is set up. (You could also wait until the first payment successfully goes through from the new institution.)

6. Keep Reserve Funds in Old Bank

Just to cover all of your bases you may want to leave reserve funds at the old bank. You may have some sort of annual membership or subscription that is automatically billed every year. When you looked back at the past few months of transactions it might not be listed. Or you could close the old account and anticipate the service provider tracking you down sometime in the future.

Am I missing significant steps in the process here?

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Roshawn @ Watson Inc August 3, 2009 at 11:07 am

Some of this is intuitive, but it doesn’t take much to rack up the fees accidently. I guess having a systematic plan like this could relieve the stress involved in the process. I particularly like tip #3. This is what always concerns me: having automatic drafts make me overdraw my account.

Kreestee August 3, 2009 at 2:28 pm

We just had to unexpectedly close our checking and savings accounts at one fiscal institution due to some suspected identity theft last week. We thought that we had cancelled all of our regularly scheduled monthly payments but got dinged for our NetFlix subscription today. I had to run to the new bank, withdraw some cash, and deposit it at the old bank to cover the charge. I also added some ‘cushion $’ so that won’t catch us off guard again.

We won’t have online access to the new accounts until sometime this week so we’re subsisting on cash only right now. I might stick with it since we’re not spending as much money. My husband and I were scrounging for $.12 at the grocery store Sunday since we cut it a little tight with the budget. Luckily, it was in the bottom of my purse *whew*!

Thanks for the great article! ~k

MoneyEnergy August 3, 2009 at 8:41 pm

I’ve been thinking about switching over to something from Citibank… I have yet to do the real research, though… I’d move to another national-wide bank like USBank or Bank of America, though, just for convenience… so maybe it’s a question of the lesser evil of these. I’d want to find one with good or free rates on international account transfers and student plans… and a good online banking system (not sure Citibank’s is all that great for usability).

SingleGuyMoney August 3, 2009 at 8:45 pm

Don’t forget about making changes to your direct deposits!! You want to be sure those follow you to the new account.

Michelle H. August 7, 2009 at 10:42 am

We just did this too- what an ordeal! I think it’ll be worth it once the 4.25% interest kicks in. I don’t know how the bank is doing that in this economy but I’m glad they are!

stevevandkim August 7, 2009 at 8:31 pm

We’ve been thinking about switching our checking account to a closer bank, but have hesitated because of all the direct deposits and automatic payments involved. I really like number two reminding us about waiting for the checks. Maybe switching after you’ve just written a number of checks and well before the next check writing session is a good idea.
Thanks for the helpful information!

Kevin August 10, 2009 at 6:06 am

@Roshawn: Exactly. There are a bunch of little steps. You might remember 90% of them, but forgetting a major one like a check that hasn’t been cashed yet or an automatic transfer… could be ugly!

@Kreestee: That sucks! Good luck with fighting off the ID theft. Have you pulled your annual credit report and called the bureaus to freeze your credit?

@MoneyEnergy: Any reason why you are targeting huge firms? Generally speaking you can find some real gems from the smaller banks or credit unions.

@SingleGuyMoney: Yea we are in the midst of doing that, too. Unfortunately my wife’s won’t kick in until the end of September (paid monthly) so I’ve got to keep the other account open until then (or likely afterwards to make sure it changes over correctly).

@Michelle: Yea, I’ll take it. Will be nice to get that big interest payment.

@Stevenandkim: Hope it helps you make a good decision. Thanks for stopping by.

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