5 Steps to Closing Old Bank Accounts

by Kevin on October 26, 2009

Your financial future is reliant on you making smart choices today that lead to big wins.

You’ve realized your bank could care less about you. You’re earning no interest on your checking account and your savings account interest is well below the national average.

It’s time to go.

Making one change — your bank — could lead to thousands of dollars in interest. That’s a big win.

5 Simple Steps to Switching to a Better Bank

1. Realize you need to change accounts.

You aren’t (or shouldn’t) be satisfied with your current bank. You are probably earning very little interest. The typical interest rate at a national (“big”) bank savings account is 0.2%.

At 0.2% you would earn $200 on $100,000 in savings.

That’s pathetic and unacceptable. It’s time to get upset, time to get mad, time to make a change.

2. Find a better deal and open the new account.

If you are earning very little interest on your checking or savings account finding a better deal will not be difficult.

Seriously. It isn’t hard. A few Google searches and you will be able to easily earn 500% more interest very easily. That’s the difference between 0.2% to 1.0%.

There are three online banks that I personally recommend because I have used them in the past:

  • ING Direct – Currently paying 1.30% on savings accounts. That is 6.5 times as much as that 0.2% you may be earning right now with your current account. You will also earn $25 if you open the account with $250 and use one of my referrals.
  • Ally Bank – Some of the highest interest rates available on CDs. Currently paying more than 8 times the national average for money market accounts.
  • Virtual Bank – currently paying 0.8% on balances less than $10,000. Has a great referral program that pays you $20 for every referral you send. (You can earn $1,000 doing this.) A quick way to earn at least $60 if you are married.

I have accounts with all three of these institutions. I’ve used ING Direct the longest and they have the best customer service.

Don’t forget to look locally. We recently found a great local bank paying over 4% on a rewards checking account. We are earning a ton of interest each month from switching to this bank.

It doesn’t really matter what new bank you pick. Just find one paying a lot more interest and get going. Open the account with a small amount of money (whatever the minimum is). More on why in a moment.

3. Re-automate everything. Set up direct deposit, monthly bills from old account.

You are just getting started by opening up the new account. Now you have to wait for everything associated with a new account — new checks, new debit cards, etc.

Once you have your new bank swag you face the monumental task of switching over all of your automatic payments and direct deposits from the old account to the new account. This one step took us over a month to complete. Yes, it is annoying. Yes, it is worth it.

Why did it take so long? Mostly direct deposit. You want to make sure your paychecks are going into the correct account before you close the old one.

To make this process more simple I recommend you find your statements for the past three months. Go line by line and find all of your automatic payments — utility bills, credit card payoffs, ministry deductions… anything that you pay automatically through your bank account.

Once you have your list you need to contact each company you have been paying and get the information changed. Also verify that the changes will take place immediately, not on the next billing cycle.

4. Transfer bulk of money from old account to new, but keep some reserves to cover forgotten automatic debts on old account.

You’ve gone through all of the above steps. You’ve changed your automatic payments. You have your new checks and debit card in hand.

Remember that you funded the account with a very small amount of money, probably whatever the minimum is? Up until now you weren’t ready to use the account.

Now you are — so do a bulk transfer of a large amount of your money to the new account.

But be careful! Leave some reserves in the old account just in case you missed an old bill.

You will get hit with all kinds of fees if an automatic payment tries to go through and there isn’t enough money in your account. You’ll get fees from the bank for overdrafting and fees from the provider for not paying on time and having a returned payment. Having reserves prevents this.

5. Close old account.

With a smile on your face and more interest in your pocket, the fun begins. Walk into your local branch office and politely ask them to close the account.

You may get a counter-pitch, but too much has been done by this point to bring you back. (Plus you may not get a pitch because your account balance will be pretty small by now. The bank won’t value your account as much.)

When you close the account they will most likely give you the remaining funds in cash. Head straight to your new bank to celebrate with your first deposit.

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