How to Break Up With Your Bank

how-to-break-up-with-your-bank

If you’ve been reading along with the Break Up With Your Bank series, you’ve learned Why You Need To Break Up With Your Bank, and know about better options for checking and savings accounts. In this post I’ll walk you through the actual steps of breaking up with your bank and getting set up with one that treats you better.

Chances are, you’ll approach a breakup in your financial life a little differently than you do for your love life. The order of the steps for breaking up with a bank aren’t quite the same as they are for a human partner. In this case, it’s okay to start seeing a new institution before you let your old one know you’re through. In fact, that’s the best way to do it.

You’re ready. But how the heck do you go about closing your old accounts? I know it’s scary, but here, I’ll walk you through the steps for opening new bank accounts and closing your old ones. So let’s do this…

1. Commit to Action

Some of us are really good at putting off things we don’t want to do. It’s incredible how many reasons you can find to delay for tomorrow what you could—and should—do today. So the first step to breaking up with your bank—commit to doing it. Tell a close friend that you’ve made the decision to switch banks, and explain to her/him what your plan is. This will help hold you accountable to making this smart financial choice for yourself even if you don’t feel like following through when it comes to actually doing it.

2. Open Your New Account(s)

Don’t close your old accounts before opening up new ones. This could leave you in a tough spot when you need to write a check, use an ATM, or pay your bills online. Do some research about the best options for you, and then get your new accounts open. For advice on what to look for, see my posts on getting a better checking and savings account.

3. Identify All Automatic Transactions

Next you’ll want to review your statements from the past several months to identify any automatic transactions that you have set up. Do you get your paychecks via direct deposit from your employer? You’ll need to set that up with your new account. Pay your rent or utility bills with automatic bill pay? Have your student and auto loans set up to transfer directly from your checking? How is your Netflix account set up? Do you automatically transfer money into your savings account each month? You might need to go back longer into your statement history than you think in order to catch all automatic transfers. Some things, like insurance payments or subscription services, may have infrequent, but automated transfers in place. Each of these need to be switched over to your new account, but hold off until you’ve transferred your money there. For now, we’re just making a list.

4. Fund Your New Account and Re-direct Your Automatic Transactions

After identifying all of your automatic transactions, you’ll need to shift those to your new accounts. First, you have to fund the new account. You should be able to move money electronically from your old accounts into the new. This could take a few days, so plan for it not being immediate. Then you need to set up all of those automatic transfers with your new account. This is the most time consuming part of the process. You’ll need to log onto your accounts and change each auto transfer individually. I recommend leaving some money in your old accounts so that you can cover any transactions already in progress without incurring overdraft fees. Your old bank may also have a minimum account balance for not charging you a fee, so be sure to leave at least that amount in the account during this process.

I know this part is annoying, but remember, you’re in this to rid yourself of unnecessary fees and to earn more than a couple of pennies a year in interest. Breakups aren’t fun, but staying in a bad situation in the long term because you want to avoid a short uncomfortable transition is not in your best interest. You know it.

5. Monitor Your Old and New Accounts to Make Sure You Didn’t Miss Anything

It’s smart to keep your old account open for a while (with a bit of money in it) to make sure you didn’t miss any auto transactions or forget about any checks that hadn’t cleared. If you close an account too early and a transaction tries to go through (say you forgot to transfer your auto pay on Netflix), many banks will re-open the account and charge you hefty overdraft fees. It pays to be patient here. Wait 45 days to make sure you’ve covered all of your bases. After the waiting period, you can empty your accounts online, or make the request when you close the account.

6. The Official Breakup: Close the Accounts

I’ll be honest. I hated this part of the process. I don’t particularly like confrontation, so I worried and fretted about the actual process of closing the account for days beforehand. Some banks will let you close your accounts online or on the phone, but I opted to go into my old bank to close up my old accounts in person. Talking directly to a banker allowed me the opportunity to ask questions, confirm that the accounts would be closed immediately, and to get a letter providing proof of the closure. Was I completely sure that I would tell the banker my intent only to have them blatantly refuse to carry out my request? Absolutely! Is that what happened? Definitely not!

I explained that I wanted to close my checking and savings account with their institution because I had found others that offered no fee ATM transactions and higher interest rates. The banker accepted my explanation and worked with me to close the accounts. I think he made a halfhearted attempt at offering me a credit card that I didn’t want, but he didn’t push it. Your experience is likely to be just as easy, so please do not take the lazy, non-confrontational approach of leaving the account open and hoping for the best. You will very likely incur fees if you do this. So don’t! Anyway, you’re going after that glorious feeling of having closure.

Note that if you have not completed the process of transferring all of the funds from your account, you should request to do so during the Breakup Conversation. If you incur fees for having a zero balance you might have opted to keep the minimum amount in your account up to this point. While you may be able to get your remaining balance in cash (I did), you may also opt to have the bank issue a check. Some banks will only offer a cashiers check, which may have a fee. If you can’t avoid the fee, accept it and think of it as a final reminder for why you’re moving onto a bank that will treat you better.

7. Enjoy Your Freedom

And that’s it. You’ve officially freed yourself from a big, bad banking situation. Go ahead and celebrate. If you opt to treat yourself, you can now safely do it without incurring extra fees for using the ATM. Go you!

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