Surveys have consistently indicated that many Americans prefer to remain with their current bank, even when aware of excessive fees. However, in the era of online banking, switching accounts is relatively straightforward.

Opening a new account with an online bank typically takes just five minutes. Closing an old checking account is a bit more involved but manageable if you follow the right steps. The crucial part is to ensure everything is set up with your new account before closing the old one, to avoid any disruptions in your banking services.

1. Look for a new bank

If your current bank is charging excessive fees or failing to provide satisfactory customer service, it might be time to consider switching. Before making the move, it’s important to research and select a new bank that meets your needs. Banks vary widely in terms of account types, fees, customer service, and mobile banking features.

2. Prepare to Switch Banks

Switching bank accounts involves careful handling to avoid potential issues. Being “unbanked” or “underbanked” can have economic consequences, so it’s crucial to manage the transition smoothly. Do not close your old checking account until you have successfully opened and funded a new one. However, if you anticipate moving away from your old bank soon, preparing in advance can help prevent any delays and ensure a seamless transition.

Here are some steps to help you prepare for switching from your old bank:

• Use Cash for Transactions: Withdraw enough cash to cover your needs until your new account is set up. Stop using your debit card and writing checks to avoid complications.
• Keep an Eye on Your Account: Keep an eye on your account to ensure all pending payments have cleared.
• Inform Check Recipients: If you have outstanding checks, inform the recipients to cash them promptly. This helps avoid the embarrassment of bounced checks.
• Adhere to Bank Policies: Continue to adhere to your bank’s rules until your account is officially closed. If there are fees for falling below a minimum balance, make sure to maintain the required balance.

3. Open an Account at Your New Bank

Opening a new bank account is straightforward when switching to an online bank. To setup an online checking account in the United States, you need to be a US citizen or resident alien and at least 18 years old. Some online banks may require a small initial deposit, which can typically be made via wire transfer from your existing bank account.

When setting up your new online bank account, you’ll need to provide the following information:

• Your name, address, and contact details.
• Your Social Security number.
• A scanned copy of a valid state ID and/or driver’s license
• Employment details, such as your occupation, employer name, and income

4. Transfer Direct Deposits and Bill Payments

This is the most challenging but essential step, and it must be completed before closing your old account. First, identify all direct deposits and automatic payments linked to your old account. Transfer each of these transactions to your new account. Carefully time this transition to ensure you don’t miss any payments, which could lead to unnecessary complications.

Bills Pay: Log into your old bank account and cancel all Bill Pay payments. Then, switch to your new bank account and set up your Bill Pay payments there.

Direct Deposits: Provide your new bank’s routing number and account number to your HR department. Inquire about how long it will take to process the change. If they indicate that the update won’t be completed in time for your next payment, ensure you keep your old account open until the transition is fully processed.

ePayments: Remember to update your banking information on PayPal and any other online payment systems you use regularly.

Automatic Debits: For any payments that are directly debited by a merchant, reach out to them and provide your new account information.

5. Close Your Previous Account

Your old bank might try to entice you back with incentives or discounted rates. However, if you’ve already gone through the process of switching, it means you’ve done your homework and prepared thoroughly. Banks can be persuasive, but stay firm in your decision. If they truly valued your business, they would have provided better service from the start.

If your old account was with a traditional bank, you may need to visit a physical branch. However, when closing an account with an online bank, you might be able to complete the process online. Be aware that some banks, but not all, charge fees for closing an account. Contact your old bank to understand their specific process and review the fine print to avoid any hidden fees. Also, ensure you transfer your remaining balance to your new bank account before closing the old one.

Finally, request a confirmation letter for your account closure from your old bank. Store it securely with your financial records and make a note of its location. This letter may be necessary as proof of account closure if any transactions attempt to debit your old account.