Switching banks might make sense if you’re paying too many fees or your savings account interest rate isn’t high enough. Comparing checking accounts and opening a new one isn’t that difficult, but closing an old account can turn into a headache if you’re not careful. Here’s what you need to do to make the transition from your old bank to your new one as smooth as possible.
1. Reroute Direct Deposits
Before you close your account, you need to have your paycheck and your other payments set up to be deposited into your new account. To make that happen, you’ll probably have to fill out a new form from your payroll department and update your routing number and your account number. It might take time to process your paperwork, so you’ll need to keep an eye on your next check to make sure it goes to the right place.
2. Update Your Bill Pay Information
Putting your bills on autopilot can be convenient, but you could run into problems if you forget to change your account information when you move over to another bank. If someone tries to deduct a bill payment after an old account is closed, one of two things could happen.
First, your old bank could reject it. And because you’d have to make the payment from your new account, a late fee could be tacked on. Or, your old bank might reopen the closed account and allow the payment to go through. In exchange for covering the bill, the bank could tack on overdraft or insufficient funds fees.
In either scenario, you can lose money by forgetting to make sure all of your automatic bill payments have the right account details.
3. Wait for Deposits and Credits to Clear
When you have something that’s still pending in an account like a deposit, you’ll need to make sure it clears before you can close the account. If you forget about your pending transactions, you run the risk of getting hit with an overdraft fee or an insufficient funds fee if you don’t have enough money in your account to cover a payment.
4. Unlink Your Accounts
If you’ve linked your old checking account to a retirement, savings or investment account at another financial institution, you’ll want to make sure you remove your information and swap it out for your new account details. That’s particularly important if you’ve got automated investments set up or you routinely have dividends transferred to your bank account.
5. Get It in Writing
You can close your old account once you’ve updated your information. If you haven’t transferred all of your money out of the account, you might be able to do it with a quick phone call. If not, you’ll have to make time to visit the bank in-person. Either way, you’ll want to be sure to get a written statement confirming that the account is closed once you’ve cleaned it out.
Watch out for Hidden Fees
Aside from potentially triggering overdraft fees, your bank could also charge you a separate fee just for closing the account. At many banks, charging this fee is a standard practice if your account has only been open for a short period of time. That’s why it’s best to check out the old account’s fee schedule to see if there are any time restrictions.
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