How to ditch your bank

By Jeanne Lee, The Associated Press

If you keep your money at a big national bank and the recent headlines about the fake-accounts scandal at Wells Fargo have you worried, it might be time to make a switch. Following these steps can make it easy.

1. CONSIDER CREDIT UNIONS AND COMMUNITY BANKS

Big banks face shareholder pressure to keep stock prices high, and it was Well Fargo’s aggressive sales targets, designed to please Wall Street, that led some employees to open millions of bogus accounts. Some financial planners suggest that consumers consider community banks that have roots in the neighbourhoods they serve or member-owned credit unions that don’t have to be concerned with pleasing shareholders.

Credit unions are similar to banks in their offerings, which include checking and savings accounts, credit cards and mortgages. Unlike banks, they have a mandate to serve their members, so they use their profits to provide lower fees and better interest rates.

Community banks are small banks that typically have a long history in a particular area and tend to keep up strong relationships with local businesses and customers.

“At a community bank, the people who work there are your neighbours,” says Brent Dickerson, owner and financial planner at Trinity Wealth Management of Lubbock, Texas. “If the people who work there and the bank itself are rooted in that community, they’re not going to burn their bridges like a national bank might.”

2. LIST EVERYTHING CONNECTED TO YOUR BANK ACCOUNT

Once you’ve chosen another institution, you’ll want to make sure all your deposits and payments get transferred smoothly. It helps to make a master list of items that are connected to your existing account. These include:

—Direct deposits.

—Automatic bill payments.

—Recurring transfers, such as to a savings or brokerage account.

—Linked accounts, like a credit card.

—Text or email alerts.

Certain payments that you make only once or twice a year might slip your mind — auto insurance or gym memberships, for example. Go through a year’s worth of financial statements to jog your memory.

3. OPEN THE NEW ACCOUNT — BUT DON’T CLOSE THE OLD ONE YET

Keep the old account open for a couple of months. Leave enough in it to stay above any required minimum and to cover payments or checks that haven’t cleared. You wouldn’t want your electricity cut off or your music streaming subscription renewal denied.

“When changing banks, it is important to monitor all the recurring payments, or you may inadvertently cut yourself off from something,” says Chris Chen, a wealth strategist at Insight Financial Strategists in Waltham, Massachusetts.

Meanwhile, when you open your new account:

—Set up direct deposit for your paycheque.

—Redirect automatic bill payments to the new account.

—Order new checks.

—Set up online banking.

—Download the new mobile banking app.

Double check your list to make sure you’ve transferred everything to the new account.

4. CLOSE YOUR OLD ACCOUNT — AND SAVE THE PAPERWORK

Once all transactions have cleared, it’s safe to close the old account, “preferably in person so that it does not fall through the cracks,” Chen advises. “Take the name of the person closing it for you, and save all the paperwork.” The Consumer Financial Protection Bureau recommends you get written proof of the account closure.

It’s best to withdraw any remaining money and close the account at the same time, to ensure that the bank doesn’t reactivate the closed account if a stray auto-payment or deposit comes in.

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This article was provided to The Associated Press by the personal finance website NerdWallet. Email staff writer Jeanne Lee: jlee@nerdwallet.com. Twitter: @jlee_jeanne.

RELATED LINKS:

NerdWallet: What Wells Fargo’s $185 Million Settlement May Mean for You

CFPB: Can I close my account whenever I want? http://www.consumerfinance.gov/askcfpb/957/can-i-close-my-account-whenever-i-want.html

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