Thursday, November 3, 2011

The Right Way to Fire Your Bank

The reason banks continue to create junk fees is simple: they understand that consumers are creatures of habit; slaves to our own laziness.  Just think about the fees you “agree” to pay when you use an ATM outside of your banks network. Ever paid $4.50 to get $20 out of the machine? Hurts, doesn’t it?  And yet, you do it again and again anyway!

I know the thought of trying to move your money and automatically scheduled bill payments from one checking account to another is often enough for most people to drop the idea before they even get started. But what’s the point in being mad at your big abusive bank and all of the excessive fees you despise, if you’re going to let a little leg work and advance planning keep you from ditching and switching?

The most important part of walking away is doing it strategically.  If you don’t want the revolution against big banks to ruin your own personal economy (bounced checks and missed payments), then follow these steps to fire your bank the right way.

Step 1 – Open Your New Checking Account – For some of you I understand that this is terribly obvious, but believe me, a light bulb has gone on for someone. All smarty pants, feel free to move on to the next step. . . .  Open your new account with the largest deposit you can handle so that you can begin to wean yourself off of the old account much more quickly. (This does not mean empty out your old bank account. This means use money that is not immediately needed to pay bills.) Get your checks and debit card ordered right away and remember to keep your new account and routing numbers handy to assist with subsequent steps.

Step 2 – Stop Using Your Old Checking Account – As much as it’s humanly possible, I suggest limiting the amount of transactions you run through the old account.  Debit card transactions are obviously easier to semi-control than checks since you can’t force anyone to deposit a check immediately. Stop writing checks from the account at least two weeks before you formally shut it down. Really longer, if possible.

Step 3 – List ALL of Your Automatic Transactions - Online banking will be a great help for this step.  Log in and check out all of the automatic credits, such as direct deposit and automatic debits, such as your bill pay or electronic fund transfers (EFTs) which are more than likely set up individually on your payees’ websites. If you don't have online banking set up, use two of your most recent paper statements. Make a list of any payments that are automatically deducted from your checking account (meaning you do not physically write and send a check or initiate the online payment yourself).  Don’t forget to consider automatic payments that are quarterly, as well.
Step 4 - Switch over all electronic deposits and withdrawals. It’s clearly easier to do this if you were the person that opened the new account with a hefty chunk of change in the first place. If you were, then switch over the deposits a bit earlier than the withdrawals, so that there is money already in the new account when payments begin to be deducted. If you weren’t, then break this into two baby steps.
A.    From the lists you've created, contact each of the creditors you normally pay automatically. If you don't have a lot of money in the new account yet, make one last payment with the old account if it happens to be due the week you are in the middle of switching and then cancel the automatic payments. Or, if you’re simply doing this online, delete all payment methods associated with the old account.  If you were able to open your checking account with a large sum of money, you can just switch the payment details from your old checking account to your new checking account without interrupting your automatic payment plan service at all.
B.    Change over your payroll direct deposit assuming that’s the greatest source for funding your checking account. Once you are sure there are no more automatic payments and savings transfers scheduled to come out of your old checking account, you can switch the payroll direct deposit (and any other sources of income that gets directly deposited) into your new checking account. Sometimes this can take up to two weeks to make the change, depending on where you are in the pay period, the employer and their particular payroll department.
Step 5 – Re-Establish Automatic Withdrawals. As soon as you see your first payroll direct deposit going into the new checking account, you can refer back to your list and re-set up any automatic bill payments you weren't able to do in the last step.  If you had creditors and expenses that you would log into the website and initiate a payment, now is a good time to log into each of your accounts and update the payment method section of your profile. This will tell the account where to pull the money from – and you'll be able to specify your new checking account details for making payments from here on out. Again, make sure that the old account is completely deleted from all online profiles.  If not, you may run the risk of thinking you’re paying from the new account, but really attempting to pay from an old account and incur additional fees both from the bank and the creditor.
Step 6 - Leave the old account open for at least 30 days (60 suggested) – Having a small balance in the account will allow you to catch any deposits or withdrawals you may have forgotten about for some reason. Even though it might feel like the balance in the old account is just sitting there wasting time, it’s actually there to protect you against your own bad memory. Just be patient. If someone cashes that graduation check from this past summer, you’ll thank me.  

Step 7 – Close down your old account – After you’ve confirmed EVERY check has cleared the account and you’ve changed all automatic payments over and have safely seen everything run smoothly for a statement cycle or two, it’s time to close the account down.  I know we like to do EVERYTHING virtually these days, but I suggest taking the time to go to your old bank in person.  Request any money left in your account or if you owe them money, take care of the balance before it ends up on your credit report.  And, yes, that can and does happen often. You might also want to end other services at that bank, such as a safety deposit box or overdraft protection account linked to the old checking account.

Remember to shred any unused checks from your old account and destroy your old ATM or debit card when you are done changing banks. That way, no one will be able to steal them, and you won't use the checks by mistake.

The reality is banks have become smart about using technology to conveniently create a very co-dependent relationship in their favor.  But again, you can break the dependency, especially if it’s for the better.  You just have to be willing to do a little work upfront!

Until Next Time,

Seek Wisdom, Find Wealth & Be Blessed!


k_rokadocious said...

I swear I read your blogs more than the bible! Just what I needed before the bank changeover day. I guess I wont be closing my b of a tomorrow but I will at least be starting the process!

Anonymous said...

Thank you for the step by step process. I am in the middle of it now and it really feels like its not going to be as bad as I thought. It pays to prepare.