7 Things You Should Know Before You Switch Banks
by Kailey Hagen | Oct. 17, 2019
Overlooking the small details can prove costly.
Switching banks can net you higher savings account interest rates, better loan offers, and superior customer service. But before you make the switch, make sure you understand what you're signing up for. You also have to know how to transfer your funds and payments over in a way that doesn't cause you to accidentally incur late payments. Here are seven things to be aware of before you switch banks.
1. Whether your new bank is FDIC insured
Most banks are Federal Deposit Insurance Corporation (FDIC) insured, but it doesn't hurt to check just in case. This insurance protects you for up to $250,000 per account in the event that the bank were to go under. Even though the odds of that are slim, it's not a chance you want to take. You can ask the bank directly if it's FDIC insured. Otherwise, it'll often say on the footer of the company's website, or you can look the bank up on the FDIC website.
2. How you can access your funds at your new bank
Traditional brick-and-mortar banks have branch locations and ATMs where you can go to get your money at any time. Make sure that there is at least one local branch and a few ATMs in the areas you commonly visit if you go this route.
Online banks typically have nationwide ATM networks, but they don't have branch locations and this can make accessing your funds a little more difficult, especially if you need to withdraw large sums of money at once. Look into how the online bank enables you to access your funds and how long it'll take to transfer them. It might still make sense to keep an account at a local bank so you can transfer funds between the two accounts when you need cash. Check into whether your bank has any monthly transaction limitations as well.
3. Interest rates at your new bank
One of the main reasons people change banks is to get better interest rates on checking and savings accounts or loans. If this is one of your key priorities when choosing a bank, make sure that your new bank actually offers better interest rates. To find out, contact the bank directly or see if it lists its rates online. Your loan rates will somewhat depend on your creditworthiness, but some banks may give more favorable rates to those with near-subprime or subprime credit than others.
Even if you aren't switching banks because you want better interest rates, it's still worth looking into what your new rates will be. That way you will know how both your loan balances and the money in your accounts will grow, compared to what you're used to. You might need to take out a loan with the bank in the future and then it will matter a lot.
4. Your new bank's online and mobile banking tools
Most banks now offer online and mobile banking so you can quickly manage your money, transfer funds between accounts, and pay bills online. Think about which features you need and make sure your new bank offers them. If you often deposit checks from your phone, for example, you'll want a mobile app that enables you to do this and that doesn't charge you a fee for every deposit.
5. Customer service at your new bank
Another popular reason people switch banks is because they're dissatisfied with the customer service they receive at their current bank. This is difficult to assess at a new bank until you're actually a customer, but if it's a large national or regional bank you can look up customer reviews online. You could also speak to some of the bank's other customers to get a feel for how they treat their customers and whether they've had any issues with the bank's staff or services.
6. How to change your automatic deposits and withdrawals
When you switch banks, you must notify all the companies that routinely send or withdraw money from your old bank account. Otherwise, you could experience a delay in receiving funds or a company might charge you a late fee because you didn't pay your bill on time.
Pull your bank account statements from the past couple of months, or past year if you have annual subscriptions, and make a note of every repeating bill or deposit. Contact all companies related to these and update your information so that your money is deposited into and withdrawn from your new account.
7. When it's safe to close your old bank account
If you close your old bank account while you still have withdrawals pending, your payments might not go through and you may get charged extra fees and penalties. Before you close your old bank accounts for good, make sure that you've switched over all your automatic deposits and withdrawals and that there are no more pending transactions.
Switching banks is a process, and getting it right takes a little research. But it's important that you do. This is the organization you're trusting with your money, so you don't want to choose the wrong company or rush things and encounter hiccups along the way. By staying mindful of the seven things listed above, you can ensure that the transition goes smoothly.
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