How to change banks and open a new bank account
Last week we spoke about the benefits and disadvantages of both a traditional bank and an online bank. Perhaps article sparked some motivation for you to change your bank account? If so, you’re in luck! This week we’re going to show you how easy it can be to change banks. We’re going to talk about everything from opening a new bank account to transferring your funds and alerting the appropriate people.
Banks can sometimes resemble that of a tumultuous relationship. You’re unhappy, you complain to your friends and family, you constantly tell yourself you’re going to do something about it, but then you never do. In hindsight though, there’s no reason for you to stick with something if it isn’t making you happy.
Therefore, if you’re not impressed with the bank account that you currently have, don’t be reluctant to change to something new. The thought of doing this may give you a bit of a headache but, believe it or not, it’s actually very simple.
How easy is it to change my bank account?
It’s really quite simple! First, you need to do your research and find the bank that you would like to move to. One main thing to consider when changing your bank account is the fees that bank charges to hold your account. Things to compare include:
- How large a balance is needed to avoid fees – This is a big one as many banks will charge monthly fees if you’re not reaching a certain threshold of deposits each month. Many traditional banks set their limit at about $2,000, which is quite steep. If fees are something you’re trying to get away from then make sure you choose a bank that accepts a lower amount before they start charging you.
You should also be wary that some banks require a deposit or recurring payment through their site to avoid further monthly fees. In addition to these, you should also ask about any other fees before you change your bank account. Questions like how much will the bank charge if you go into overdraft? Is there a fee to close the account? How long will it take to transfer money to other bank accounts? How much does it cost to make an international transfer?
- Are there fees for using other banks ATMs? – If you’re using an ATM that belongs to one of the big four banks, they have recently abolished withdrawal fees for non-customers. This is definitely a bonus as you know you can use these ATM’s without it costing you money.
However, you should also find out how much it will cost you to use independent ATM’s, as sometimes these fees can be substantial. If you travel a fair bit, it might also be a good idea to look for a bank that offers free ATM services around the country.
- What overdraft protection options does the bank account offer? – Overdraft is not an ideal situation to be in as it means that your account has gone into a negative number. However, things happen and it’s possible to accidentally overspend sometimes. Especially if you have direct debits coming out of your bank account.
If you do ever go into overdraft, it’s important that are aware of the options available to you. Some banks charge enormous fees if your balance goes into negative. Therefore, this is something you want to try and avoid. You should compare the overdraft penalty fee of different banks along with the maximum amount of times the fee is applied per day. Also look at the minimum amount required to trigger an overdraft fee and extended overdraft penalty fee charged for each day the bank account is in negative.
- How much interest is paid on savings accounts? – As we mentioned last week, interest rates offered on traditional bank savings accounts are generally quite low. In order to get the most value out of your savings, compare the how much each bank will pay you for your saving efforts.
These are the most important things to consider when looking for a new bank account. Some other aspects you might want to have a think about include:
- How soon are deposit funds available?
- Are mobile banking and online bill pay offered?
- Are reward programs offered?
How do I change my bank account?
The process can be as simple or as difficult as you make it. Here is a checklist or the best order to do things that you can choose to follow if you wish.
Step 1 – Open your new bank account
Once you have decided on the bank you would like to switch to, the first thing you should do is open your bank account with them. This process is generally quite easy as banks love new customers so your initial experience should be rather pleasant. The bank will then organise to post you your new bank cards and chequebook (if necessary). These will usually take between 2-5 business days to arrive. Once they do, you can activate your account.
Step 2 – Transfer money between your current bank account and your new account
Most banks will require a minimum deposit in order to fully activate your account. This amount is normally quite small, it’s mostly just so the bank has time to establish the connection between the 2 accounts before your cards arrive. It may take a couple of days for the funds the transfer over but without your kinds, there’s not too much of a rush.
Step 3 – Set up online banking and bill pay
This is only really applicable if you’re moving to another traditional bank as online banks will automatically have online banking set up. For a traditional bank account, you can either call your bank or jump on to their website to set up online banking. This will be handy for paying bills, receiving statements, and applying for quick online loans. For online banks, it’s always a good idea to download the app. This will make everyday transactions a lot easier.
Step 4 – Move any automatic payments from your old account to your new account
If you have any payments that are automatically taken out of your account each month, make sure you change your account details to match your new bank account. These payments would include things like:
- Netflix and other subscriptions channels,
- Insurance (life, home, pet, car, etc.),
- Loan repayments (house, car, personal loan, etc.),
- Magazine subscriptions,
- Credit card repayments,
- Bills (phone/ mobile network, internet electricity, gas, etc.),
- iTunes/Apple ID,
- Go Via/Toll fees,
- eBay, and
- School/university/online courses
Make sure you change everything over to avoid any defaults. Even if you’re not changing banks and just getting a new card, you will still need to notify all of these services.
Step 5 – Move direct deposits to your new bank account
This step includes notifying your employer or any other parties that may be depositing money into your bank account. To notify your employer, you generally just need to fill out new deposit forms and submit them to the payroll department. If you’re not too sure how to do this then we recommend asking your employer directly to avoid any miscommunication.
Apart from your usual employment, some other forms of direct deposits you might receive include:
- Government benefits payments
- Medicare rebates
- Tax refunds
- Alternative income sources (e.g. Airbnb, Uber, Air Tasker, etc.)
- Friends and family
Some banks will actually provide you with a form which will automatically generate a suite of letters for you to send to your employer and other regular billers.
Step 6 – Close your old account
Once you have completed all the steps above and checked them all twice, it’s now to close your old account. This can usually be done with a phone call to the bank. Some banks may require you to go to the branch but it’s not always necessary. Make sure you check with the bank, once your old bank account has been closed, that there are no outstanding fees and no remaining balance.
So, there you have it. 6 simple steps to changing banks. It’s not as involved as you thought it was, is it?
Before you go, here are a few more things you might consider before making the decision to change your bank account.
- Is it worth it? – Although the process of changing your bank account is really quite simple, any mistakes can cost you money. Therefore, it’s important to make sure you are 100% certain that changing banks will benefit significantly before you make the change. It might be a good idea to look at ASIC’s compound interest calculator to make sure you’re going to be getting a better deal.
- Evaluate the options – Once again, it’s really important to do your research. If you’ve decided to change banks because you’re unhappy with your current one and you’re not sure which bank to move to, compare all of them so you can pick the best one for you.
- Ask for help – If you’re really not sure about what bank to move to, why not ask for help? Seeking the help of a financial advisor could give you a much better idea about what type of bank account is most suited for your situation. It could also give you a better handle on your spending and help you figure out what to do to get the most out of your bank.
If you have just recently changed banks and have already gone through this process, we’d love to hear from you! Perhaps you have a different checklist that you follow? Or maybe you didn’t have a checklist and your experience was slightly painful. Whatever it is, let us know!
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