How to decide whether to switch and how to choose a good bank account to switch to
In my previous article “How to decide if you should switch your bank account“, I discussed reasons for and against switching bank accounts and a few places you might look for relevant information.
What can go wrong when you switch bank accounts?
There are a few things that can go wrong when you switch accounts. Hopefully, if you follow the steps below, you shouldn’t get any bank overdraw fees or any other consequences from switching your bank account.
The process of switching bank accounts
STEP 1: Set up the new account
The first step is starting your new account:
- Apply online – a lot of banks have an online process to apply for new accounts.
- Prove your identity – after you have completed the online form, then you will usually be required to go into the bank to provide documentation to prove your identity. If you already have an account with the same bank, then you usually would not need to provide identification.
- Activate your card once received – in due course (hopefully a few weeks or less) you will receive your card in the mail. The card will need to be activated (either by a branch, over the phone or online), at which point you are probably good to start using your card and the bank account.
- Set up internet and telephone banking – you should set up internet and telephone banking when you have the chance so you can monitor your account balance.
STEP 2: Keep enough money in the old account
If you don’t leave enough money in the old account, you could get stung by bank fees for overdrawing your account.
Beware, it might take 2 weeks to switch accounts, but it also might take 2 months.
How much money? Probably enough cash to allow direct debits for 2 months, plus a buffer. I found it annoying when I had to transfer money back to the old account because I hadn’t left enough to cover direct debits.
STEP 3: Reallocate all credits (eg. income) to go into the new account
If you are like most people, this is probably the easiest step, but I recommend checking your bank statement and highlighting any credits that need to be changed (you might also highlight direct debits at the same time to help with step 4).
- Salary – advise your HR or payroll person to update your bank details. Remember that payroll is usually very busy just before paying staff, so requesting the change a day or two before you get paid might not make you the most popular person in the office.
- Interest – if you have a term deposit maturing, remember to advise the bank of your new bank details.
- Medicare and private health refunds – advise Medicare and your private health fund in order to receive any refunds on health expenses.
STEP 4: Reallocate all debits (eg. expenses) into the new account
Firstly check your bank statements for all direct debits. While you can probably list them, you don’t want to forget one.
- Call to reallocate direct debits – call any direct debit suppliers and transfer these arrangements to the new account.
This might include your private health, electricity/gas, pay TV, mobile phone or anything else that you have on a direct debit arrangement.
- Factor in time for suppliers to switch – remember that big companies might not action your request to switch account details straight away (although most should).
Tip: Don’t forget any direct debit arrangements that might debit your account infrequently. I was given a penalty notice by the RTA when I received a new credit card number and forgot to tell the RTA.
Cancel any recurring payments and consider any future payments
Cancel any recurring payments that you have set up with your old account.
Tell people that you have a new account
Besides the above, I recommend sending an email to let people know you have a new account. Note that if someone transfers money into an account that is closed, the money will be paid back (I believe the banks have rules that prevent them from reusing bank account numbers for a certain period to stop payments being sent to the wrong account).
- Family – you might as well let mum know your new bank details!
- Customers – note that unless you send an email, people might not read the new account details on your invoice, even if it clearly says “new bank details”.