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Switching Banks: 4 Steps For a Smooth Transition

Following news of Bank of America's $5 monthly debit card fee, four of out five debit-card holders now say they'll switch banks if theirs decides to charge them for making purchases with their card, according to a recent poll from

If you're contemplating making such a move, take note of these four steps:

Choose Carefully
While your priority may be to find a bank with fewer or no fees, you want to consider other factors as well -- such as proximity to branches and bank ATMs -- before making the switch. Consider how you bank and what your needs are when selecting the next best place to park your cash. (You may also want to check out my recent post on the 7 Best Banks of 2011.)

For example, if you travel overseas several times a year, will joining a local credit union -- despite its super low fees -- prove inconvenient? If you need to regularly transfer money to outside accounts, are there fees for that? Are there minimum balance requirements you can't meet? Invest a little time up front to read all the fine print.

Transfer Some of Your Money
Once you've chosen a new bank, you may be required to place an initial deposit of, say, $100 to activate your account. You may be tempted to just transfer all your money from your old bank -- but a rash move could prove costly. Follow the new account's minimum guidelines for now, but then get all your ducks in a row.

Keep some money remaining in your old account during the transition, at least enough to cover any outstanding checks you've written that have yet to clear (and enough to meet any minimum balance requirements). And give yourself a few months to test-drive any rerouted automatic payments and deposits. (More on that in a minute.) You may need a couple of months in all before you totally ditch your old one.

To transfer your cash from one bank to another, you can either use electronic transfers or handle it in person. Be sure to check out various fees associated with the various options. If you're doing an electronic transaction, you'll need to provide your old bank with your new account and routing numbers.

Reroute Direct Deposits
If your paycheck is directly deposited, notify your employer of your new account info as soon as you've established a new account. The deposits will need to get rerouted -- a process that may take as much as a month. Your HR department should be able to provide an approximate time frame.

Set Up New Auto-Payments
Switching banks requires a bit of traffic control. If you are automatically paying any bills via your old bank account, cancel those auto-payments -- and as soon as you know you have enough in your new account, set up new auto-payment schedules using your new account information. Keeping a recent bank statement at hand -- so you can see your list of debits -- visit the web sites of each creditor, utility company or credit card company you pay automatically, and insert your new billing information on your profile page.

If you're worried about having enough money in the new account, by the way, you can opt to pay your bills manually for the first month or so. Just be sure you don't miss a payment deadline, or you'll have a new set of fees to worry about: Late fees.

Farnoosh Torabi is a personal finance journalist and commentator. She is the author of the new book Psych Yourself Rich, Get the Mindset and Discipline You Need to Build Your Financial Life. Follow her at and on Twitter/farnoosh
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