Wednesday, 9 December 2015
Wonder how many Americans switch banks each year? Not as many as you might think.
In fact, a 2012 study by Javelin Strategy & Research found that while 11 percent of consumers said they would like to switch banks, only 3 percent ultimately made the move. What causes the inertia? Many people just think changing banks will be too much of a hassle, according to Consumer Reports.
Gone are the days of letting the last few checks clear and then closing your account. Now checking accounts are the hub of numerous electronic financial transactions, making the task of switching banks feel that much more daunting. But there can be big financial benefits to switching. So how can you change banks with minimal stress? Here are some tips to simplify the process:
If you do your homework, you can find a new checking account that will match your banking style, as well as limit the fees you pay. For instance, many banks will waive the monthly checking account fee if you meet certain requirements, like a minimum balance, use of direct deposit, or electronic bill pay. Similarly, if you use ATMs regularly, you should look for a bank that has a large network of ATMs in your area.
Also, while most banks offer free mobile and online banking these days, make sure you're aware of fees for non-electronic transactions. Some accounts might allow you to make a limited number of in-branch deposits or write a limited number of checks per month. Exceed those limits, and you'll pay a per-transaction fee. Plenty of banks offer accounts that you can customize to meet your specific banking needs. In many cases, adding certain features can ultimately reduce monthly charges and fees.
Even if you do most of your daily banking electronically, at some point you may need to talk to an actual human being.
Check out the customer service options. How many branches do they have? Is there a dedicated customer service phone number? How soon can you get help when you need it?
When you open your account, make a deposit—but do not empty your old account immediately. There are probably still electronic payments and other transactions linked to that account, and maybe even a check or two you've written that haven't been cashed yet. It's wise to leave money in your old account for a while, so you don't face fees if outstanding checks don't clear or your electronic payments are denied.
And when you open your account, make sure you order new checks as soon as possible—you might need a voided check to change your direct deposit to your new account.
Remember to fill out a new direct deposit form at your workplace. It could take at least one or two pay periods for your direct deposit to switch to your new account. Again, you'll need to carefully manage how much money is in each account so you have enough to cover transactions in both of them.
You should also make sure you change direct deposit for all payments made to you, including things like Social Security. The direct deposit form for Social Security payments and further detailed instructions can be found here . Some people have virtually all their bills and payments deducted automatically.
If you're one of them, it's smart to sit down with a copy of your monthly statement from your old account and list every automatic withdrawal. Go to the payee's website and update your account information. If you've arranged for auto payments through your old checking account, make sure to delete them and then set up new auto payments linked from your new account.
According to Consumer Reports, some banks will reopen closed checking accounts without notifying the account holder. These back-from-the-dead accounts are appropriately called "zombie" accounts.
Here's what happens: You have an annual magazine subscription that automatically renews. You closed your checking account three months ago, but the subscription charge is presented against the closed account. Instead of rejecting the payment, the bank opens your old account without your knowledge. As a result, you rack up overdraft charges and fees on an old account that you thought was dead. Don't take any chances.
Go through your old account statements, and make sure that all automatic payments are cancelled. Then leave your old account open with some funds in it—enough to cover the minimum balance requirement if possible—for at least several months.
Close the old account
You'll probably need to make a trip to the branch to actually close the account, and you may even need some documentation of your request. Call ahead to your soon to-be-former bank and ask what you need to close your checking account. Find out what options are available for transferring or receiving the final funds from the account—and if there are fees attached.
Several days after you close the account, you should receive a letter from the bank confirming that your account is indeed closed. Keep this letter, but make sure you destroy any ATM or debit cards, and all unused checks associated with the old account. Once you've followed these steps, you can relax.
Now that you've found an account that fits your financial style, you hopefully won't be faced with changing banks again for a long time.
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