Changing banks requires work, but it can be done

The Baltimore Sun

DALLAS -- With their bank accounts tethered to online bill paying, automatic debits and direct deposits of paychecks, most consumers cringe at the thought of closing a bank account to move to another financial institution.

"There is a lot of paperwork, and most consumers won't do it unless there is a good reason, or they are upset with poor customer service at their current bank," said Kenneth H. Thomas, a Miami bank consultant.

Financial institutions know this, and that is why they are spending marketing dollars to get your business.

"We're throwing cash at people; we're throwing gifts at people," said Chris Walton, vice president of product development at Texans Credit Union in Dallas.

There might not be 50 ways to leave your banker, but it can be done.

To make the process of opening an account easier for consumers, many financial institutions have created "switch kits," which take account holders through the step-by-step process of opening one account and closing another.

The institutions have model letters that consumers can use to inform their employers (for direct deposit of payroll) and the companies that handle direct debits for their bills. The kits include checklists that consumers can review.

Competition is part of the reason for the fierce marketing. Banks are popping up on every corner, and new names occasionally enter the market.

But falling interest rates and tightening credit markets are feeding the competitive frenzy. "Banks need to maintain profits by trying to encourage retail core deposits, not 'hot' money," Thomas said.

Despite the come-ons, consumers still worry that transferring their account information will result in chaos.

Capital One Bank's SmartSwitch, for example, enables consumers to electronically transfer the companies it pays online to Capital One. "It's a complement to other products we already offer," said Pam Hymel, manager of e-commerce for Capital One.

If you decide to switch banks, here are some tips to ensure that the process goes smoothly:

Balance your checkbook and make sure all outstanding checks have cleared before you close your account. This will ensure that you and the bank agree on how much money you are due. Also, you won't get hit with fees for checks that bounce after you close the account.

Open an account at your new bank before you leave your old bank. That way you can write checks and make ATM withdrawals without interruption.

"Decide on the dollar amount that you're comfortable leaving in the old account just for those 'oops' moments and use the remainder of the balance to open the new account," said Tracie Gusola of Comerica Bank.

If you've arranged for direct deposit of your pay or benefits, don't close the old account until you're sure the next scheduled payment will go into the new account.

If you arranged with your old bank to regularly transfer money from your account to pay life insurance premiums or your mortgage, make arrangements for future payments through your new bank.

If you're changing addresses, make sure in writing that your old bank has your new address and phone number. Your bank may need to contact you after you close your account.

Be sure your financial records at home make clear that your account was closed. Otherwise, you or your heirs might worry later that there's money "forgotten" in an old bank account and waste time trying to recover it.

Ask your employer what the company needs so it can switch direct deposit of your paychecks to your new account. Usually, it is your personal information, new bank account and routing numbers, deposit information and your authorization. You also will have to provide a voided check.

Many financial institutions will help you with this process.

Contact each company that accepts automatic withdrawal or debit-card payment from your old account.

Canceling automatic payments usually requires providing the company or payee information, your personal information, the bank account, routing or debit-card numbers for your old and new accounts, a copy of a voided check and your authorization.

Before switching accounts, ask yourself if you really want to change banks.

About once a year, talk to a customer service representative at your bank to make sure you are signed up for the right programs to meet your needs. A simple adjustment to your banking practices -- such as having your paycheck automatically deposited into your checking account -- might get you a higher interest rate or reduce or eliminate certain service charges.

A good track record at the bank may qualify you for a lower interest rate on a loan or credit card.

Periodically compare financial services at other institutions, just as you would any consumer item. You want to be sure that the rates, fees and services at your existing bank are comparable to others in the marketplace.

Switch banks for the right reasons.

"Mainly convenience, since the teaser rates will be forgotten," said Thomas, the bank consultant. "With costs of time and gas, find a bank most convenient to home, work, shopping or in between on a major road."

He prefers dealing with at least one big bank "for their many services and branches, and at least one community bank nearby for friendly customer service, where I am a name, not a number, and where I can see the president in his office, rather than getting on a plane to New York City to see his office building."

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