Open your new checking account and fund it

Before doing anything with your current account, you’ll want to open up your new account and fund it.  I suggest transferring a small amount first to get the account set up.

When you’re ready to move all your funds over to the new account, be careful not to withdraw too much from your current checking account.  This could put you in an overdraft situation.  So, here is how I specifically recommend avoid this problem:

1. If you’re keeping track of spending in the current account look at your checkbook register or your personal finance software.  It’s wherever you enter your transactions after they occur.
2. Log into your current checking account online and write down the balance.  If the balance is the same as what you have in your register there should not be any more transactions yet to clear your current account (assuming you’ve recording all your spending).
3. If you do have different balances, you need to look at what makes up the difference.  Your register should have every transaction.  You know the transactions in your register will eventually show up in your current checking account, so you’ll not want to transfer to the new account more than what will be required to cover them.

I’m conservative when it comes to these things as I want to make sure I don’t make a mistake.  So rather than leaving just enough to cover any outstanding transactions, I would recommend keeping some extra funds in the account just until everything clears.  How much?  It’s up to you.  Just decide what amount is going to keep you in the safe zone.

Once you’ve transferred your funds (again leaving more than enough to cover outstanding transactions) over to the new account, you’re able to start using it while comfortably waiting to clear all transactions from your old account.  But, there are still a few more steps to take care of before you’re done.

Change direct deposits

You’ll want to make sure your deposits now go to your new checking account, so contact your HR department to complete the appropriate paperwork to make the change.  Other changes, as Money suggests, may include investment income, pension and Social Security payments.

Change automatic payments

If you’ve set up automatic bill payments or have funds automatically withdrawn from your account at a certain time each month, you’ll want to change them over to your new account.  Hopefully, you can make most of these changes online these days, but if you can’t, I recommend calling the company once you have enough funds in your new account to cover any payments.

Allow yourself plenty of lead time on making such changes.  Money recommends two weeks of lead time before a bill is due.  I tend to agree with this conservative advice.  Again, if you’re not careful, you could put yourself in an overdraft situation.

Transfer remaining funds and close account

Once all transactions have cleared your old account, automatic payments have been changed and deposits are going to the new account, you can now close your old account.

While none of this is rocket science it can result in a mistake if you’re not careful.  The main thing to keep in mind is to stay organized.  Don’t move to quickly leaving your account empty when transactions haven’t cleared or automatic payments are soon to be withdrawn.  If you want to be extra safe, you can always leave both accounts open for a while and keep some funds in your old account until you’re certain everything has cleared.

Do you have any tips for switching to a new bank account you can share with others?

The article mentions banks need our business more than ever right now, but they are continuing to push people away because of high fees and poor service.

As with most products, I think it just goes back to having good customer service and a quality product to be competitive.  If one of these is missing it makes it difficult to become a long-term or repeat customer.

Unfortunately, there are a lot of banks out there that don’t get it.  The article pointed out that just 35% of people are committed to their bank, according to a recent J.D. Power & Associates study.  Given 65% of people are potentially open to a change; I thought it might be good to highlight the ideal characteristics that might be used as criteria for evaluating another financial institution.

Ideal characteristics to evaluate your new bank

Money management tools

Tools may include the ability to easily transfer funds between accounts, or ways to look at all of your accounts at a glance.

Easier ways to manage saving

A key to saving is prioritized saving.  Once you have your list of savings needs with your emergency fund first, you should be able to separate funds for such things as car savings, or other upcoming needs.

Deliver good customer service

No matter the tools and resources available on the web, people are still going to eventually want to speak to someone with questions or problems.  The better banks will retain some mode of customer service contact for their customers and make this service readily available for them.

On the go or mobile capabilities

The trend in software is to provide mobile versions.  With devices such as the iPhone, people are able to get access to information much easier.  Banks and other financial institutions should start offering customers secure ways to access their information when on the go.

Realistic about fees

Finally, no one likes paying fees, especially, if they are ridiculous overdraft fees and ATM fees.  Some banks provide the ability to link checking accounts to brokerage accounts or credit to use for overdrafts.  Of course, good money management will prevent this from occurring, but people do make mistakes from time to time and a sky high overdraft fee and a few overdrafts can add up to over $100 fast.

Additional characteristics to evaluate your next bank

ATMs

One characteristic not mentioned, but I think is important is the ability to access your money via ATM when needed.  I don’t think ATMs are absolutely necessary, but it does add one more layer of convenience.

Interest rate

Another characteristic not mentioned, I think is on everyone’s minds is the interest rate or yield on savings accounts.  I think this one should be added to the list and considered as different banks are evaluated.  While some banks may be known for their checking services, they may not do as well with the yield on their savings accounts.

ING Direct “gets it”

Interestingly, ING Direct was mentioned a few times in the article as a bank that “gets it.”  ING is an online institution I’ve recommended here at One Money Design.  You can read my review of the Orange Savings account here.

Noted was ING’s ability to create sub accounts or buckets for managing money.  They also have a reasonable policy for overdrafts by allowing the link up with a line of credit at what is a lower rate than most credit.

• Learn more about the Orange Savings Account.
• Learn more about the ING DIRECT Checking Account.

What are the ideal characteristics for you when it comes to evaluating a new bank?