How to change banks

If you’re looking for a better rate, keen to consolidate your finances, or just looking for an institution whose values match yours, you may be wondering how to change banks – here are some important things to know.

It’s likely that many of us use our bank accounts every day, whether it’s for paying bills and direct debits, doing everyday banking, transferring money to pay off credit cards, or checking the balance of our sayings. Given the importance of where you put your money, satisfaction with your financial institution is key.

If your bank is not performing well in terms of customer service and ease of doing day-to-day banking, or if you think you could be getting a better deal elsewhere, then you may be looking to switch. If so, it’s important to compare your options beforehand, and make sure you take all necessary steps to complete the switch.

Changing your savings or transaction accounts is a relatively easy process in Australia, which is partly thanks to federal government rules requiring banks play an active role in helping customers switch. If you’re wondering how to change banks, then there are five easy steps you can follow.

Step 1: Compare your current bank with others

There are a number of reasons why a new everyday or savings account could potentially be a better fit for you. Two key things to look for in a savings account are low fees (or preferably no fees) and a higher interest rate. There are also some other key things to consider, including:

• any requirements necessary to secure a bonus interest rate if one applies
• access to branches or ATMs: some banks may have limited or no physical presence
• online functionality or app usability
• customer service
• the ability to link your accounts with other products.

If you’re thinking about switching banks but not sure where to start, Canstar’s expert Everyday Banking Awards could be a good place to start to find the providers that offer the best-rated combination of price and features to Australian consumers.

You can also compare your current bank with others using Canstar’s comparison tables.

Step 2: Open your new account

Once you’ve found a new bank that suits your needs and goals, it’s time to open your new account. If you have internet access, in some instances you can open a new savings or transaction account in as little as 10 minutes by visiting the provider’s website and clicking the relevant link.

While the requirements for signing up will generally vary from provider to provider, most online signup processes require you to enter a few personal details including your name, address, contact information and proof of identification (i.e a driver’s licence).

Sometimes you may need to head into the local branch to confirm your identity. If you have an option to download the relevant app on your smartphone, this can make the signup process faster.

It is important to keep in mind that if you want a separate savings account, to keep your money in longer term, and a transaction account, to use everyday, then you’ll have to open both. You are not required to have your savings and transaction accounts with the same provider.

Some bank accounts require you to deposit money in each account before it becomes active. You will therefore need to transfer a small amount of money over from your current account – the length of time this could take may vary depending on your bank of choice.

Once you have signed up, it may be that your bank provides a digital and a physical debit card. Digital cards can typically be used as soon as the account is open, and added to a digital wallet (depending on the provider’s digital banking rules). Physical cards will generally arrive in the mail within a few days to a week after opening an account. You will need to activate this card before you can use it and this may be completed with a phone call, online or in-app, depending on the options provided by the institution.

As always, it is important to ensure you read the terms and conditions of your new account and the product disclosure statement (PDS) before you open it.

Step 3: Get a list of your direct debits

This step can make the whole process of transferring accounts much easier and can help you avoid missing payments down the line. If you ask your new bank to help you switch, they will likely be able to contact your old bank for you and get a complete list of direct debits (regular payments you make) and credits (regular payments you receive, such as salary) for the previous 13 months.

Alternatively, you can contact your existing bank yourself and ask them to give you the list, but it is likely if you do this that your bank may present you with a sales pitch to try and convince you to stay on as a customer.

It’s important to know that some direct debits may not show up on that list. The following are some examples of what could be missing:

• Pay anyone transactions (such as one-off rent payments or bills)
• BPAY payments.

Compare your list to your statement to double check all payments are included.

Getting this list can be an important step, as is setting up the new direct debits. Businesses who regularly make direct debit deductions, such as your gym or insurance provider, won’t be aware of your changed details without you notifying them. If they go to charge your normal payment from your old bank account and it is dishonoured because there’s no money in your account (or it’s closed), they may charge you default or late fees, and your old financial institution may charge you a fee as well.

Step 4: Transfer your direct debits

Once you have the list of direct debits, you can transfer them to your new bank account. You have two options for this.

1. You can do each one manually: You could contact each company on the list and notify them of your change of bank details. Often, this can be done online.
2. Your bank can do it for you: This could be a more convenient option for some, especially if you have a large number of direct debits and credits. For this to happen, you generally have to fill out a form listing the businesses from step three and send it to your new bank.. If you want to be extra safe, you can confirm with your new bank that each direct debit has been transferred.

Don’t forget: you will need to tell your employer, and anyone else who pays funds into your account, about your changed bank details for your pay to be deposited.

Step 5: Transfer remaining funds and close your old account

Now you have set up your direct debits, it’s time to say goodbye to your old account, assuming you don’t need it for anything else. Before you close your old account, it can be a good idea to leave it active for a few weeks with some funds available, in case any of your direct debits have been missed.

It is also important to keep in mind that institutions may charge dishonour fees if an attempted transaction is declined, so keeping cash in your account as a contingency can be a way to avoid this as you check and see if you’ve missed or forgotten about any direct debits.

Once you’re sure all the necessary changes have been made for direct debits and you don’t plan to keep the account, you can transfer the remaining funds and close it down. You can’t always close the account online, so you may need to call or walk into a branch.

Cover image source: Ground Picture/Shutterstock.com