How to Switch to a Free Bank Account in 5 Simple Steps

Tips to find a bank that charges no fees, plus 5 easy steps to a smooth transition.

Laura Adams, MBA
5-minute read
Episode #241


Lately, there’s been a lot of talk about bank fees going through the roof. I’ll tell you why you could see your bank fees rise and where to find a less expensive bank that will save you money.  I’ll also show you the right way to switch bank accounts in 5 simple steps.

Why Bank Fees Are Increasing

The reason you might get hit with new bank fees is because federal regulations are putting a crimp in bank profits. The limit that banks can charge merchants when you swipe a debit card has now been cut in half. As you can imagine, banks aren’t happy about that; they say it could cut their revenue by as much as 40 percent. So they’re implementing new fees to make up the difference.

Here are some of the fees that big banks have put into place or are considering charging their customers: 

• Monthly fees of up to $5 to use a debit card

• Debit card transaction fees each time you swipe

• Fees to receive paper statements 

• Fewer or no debit card rewards

• Increased ATM fees 

• Fees to access online banking

How to Change Banks

Banks have to notify you before they start charging new fees—so be sure to read any mail notices that you receive from them. If you aren’t happy about having new or increased fees, it might be time to change banks. Switching bank accounts does take a little effort on your part, but if you follow my 5 Quick and Dirty steps, the transition will be smooth as silk:

Step #1: Do Your Research

The first step is to shop for a low-cost bank or credit union that offers the services you need. Internet-only banks are offering some of the best deals, but local credit unions and small community banks can also be fantastic, low-cost options. 

I found my bank at checkingfinder.com, where you can compare free checking accounts nationwide. Each institution in the checkingfinder.com database offers fantastic perks like high interest rates, free online banking and bill pay, reimbursed ATM fees, no minimum balance, and FDIC insurance (or NCUA coverage, the equivalent insurance for credit unions). It just doesn’t get any better than that! 

Here are more great places to find a better bank:

• Ally.com

• Perkstreet.com

• Depositaccounts.com

• Bankrate.com

• Gobankingrates.com

Step #2: Open Your New Account

Once you choose a new bank, the second step is to open and fund your account. Most banks accept a variety of payment options for your initial deposit, including cash, check, or a credit or debit card. You can also initiate a transfer from the account you intend to close—you just need to have the bank routing and account numbers handy.

Fund your new account with just a small deposit to get started. Remember that you need to keep enough money in your old account to cover any outstanding checks or upcoming automatic payments that will be drafted before you can change them. 

Step #3: Change Automatic Transactions

This is the tricky part. You have to switch over your automatic deposits and withdrawals as close together as possible and make sure that you can cover any unexpected payments that might clear your old account during the transition period.

So step 3 is to make a list of each recurring transaction—loan payments, insurance premiums, gym memberships, monthly subscriptions, and payroll deposits. Your list should also have the next date you expect these automatic transactions to hit your account. To make sure you don’t miss anything, simply scan your last few bank statements and look for entries that are happening on auto-pilot.

It’s best to switch your automatic deposits first, so you know exactly when your income will begin flowing into the new account. Most banks have a direct deposit form that you can send to your employer or other income sources that authorizes them to update your account information. Then you can switch over your automatic payments. 

Here’s an important tip: Don’t assume that just because you submit an account change form that the very next direct deposit or automatic withdrawal will hit your new account. Depending on how much advance notice an employer or a merchant needs, the change may take a full accounting cycle to take effect. 

So always verify the exact date the change will occur—or leave enough money in your old account to cover any recurring payments. This is critical because if you come up short you could be charged the double whammy of an insufficient funds fee from the bank and a late payment fee from the biller.

Step #4: Stop Using Your Old Account

After your automatic deposits and withdrawals have been switched over, the fourth step is to stop using your old debit card or paper checks. I’ll tell you when to destroy them in just a moment.

Remember that you might have other accounts linked to the one you close, like a credit card, a retail rewards card, or a PayPal account. Log on to any linked accounts to update your information online or contact the company by phone.

Step #5: Close Your Old Account

One of the biggest mistakes people make is to close their old bank account too early, before all the pending transactions have cleared. Wait until you have an account statement from your new bank to verify that each of your monthly automatic transactions is linked to the new account. 

Many banks require you to speak to a representative in person or on the phone to close an account. If you do have a remaining balance they can transfer the funds to your new bank account or mail you a paper check. Once your account is officially closed, you can destroy your old debit card or paper checks. 

If you’re worried about switching a bank account on your own, it doesn’t hurt to ask for help from a customer service representative. They might be willing to assist you to make sure that nothing falls through the cracks. 

Making the switch to a better bank can be the key to getting better service, paying fewer fees, and earning more interest on the money you already have.

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.