One rainy day last year, I looked at my savings account and had an epiphany: I had been with the same bank since I was ten years old and had no idea why. At no point had I questioned my customer loyalty, or whether it was even deserved. Switching institutions seemed like such a time-consuming task that I hadn’t even considered it. Besides, all banks were pretty much the same, right? But when I looked at the high service fees I was paying and the meagre interest I was earning, I started wondering if there weren’t better places for my money. Spoiler alert: there were.
Want to know how I finally made the switch? Here are the steps you’ll need to take:
How to switch banks
- Consider why you want to switch banks
- Assess your needs
- Open a new account
- Redirect automatic payments and deposits
- Begin using your new account
- Close your old account
Why do you want to switch banks?
In my case, it’s simple: the money in my accounts wasn’t growing and could be blossoming elsewhere. Comparing notes with friends, the fees and interest rates of different banks weren’t the same. My eyes were now open to how much money I could be making elsewhere.
Other reasons could vary. It’s possible you can’t stand your bank’s mobile app or website. Maybe their customer service is horrible. Or you’re moving out of your bank’s area of operation and need something closer to your new home.
For some, the temptation of sign-up bonuses and rewards is a big draw. These can be everything from cash bonuses, free items such as iPads, or promises of no fees and better rates for your first year. One example is this offer from Bank of Montreal that will earn you a bonus of up to $350 when you open a new Premium or Performance chequing account with them online. Another is this one from CIBC that promises a bonus rate of 1.25% when you sign up for an eAdvantage savings account.
Whatever the inspiration, you deserve a bank that will meet your needs. But what are they?
Assess your needs
While most Canadians’ banking needs are similar, their levels of priority are what’s unique to the individual. For example, if you’re someone who does all their banking online and rarely uses cash, nearby ATMs are not going to be high on your wishlist, while an easy-to-use mobile app and website most likely will be.
Compare the best savings accounts in Canadasee the rates
To decide what your own hierarchy of needs are, try making a list of everything you’re looking for - starting with your absolute “musts” all the way down to things that would be nice, but aren’t essential. Once you’ve got this established, you can match your most important needs with information from bank websites, eventually arriving at one institution that suits you best.
Reasons to switch banks
- Easier website and app
- Higher interest rates and lower fees
- Access to ATMs
- Branches open late and on weekends
- User-friendly money transferring
- Tighter security
- Better customer service
- Rewards and incentives for new clients
- Shorter wait times
How to open a bank account
Once I knew what I was looking for, the process of shopping around for a new bank began. It was surprisingly refreshing. I wasn’t going to just accept whatever charges and interest rates my bank decided on - I felt in control of my money for the first time.
Compare bank accounts
I made a list of every bank, both online and brick-and-mortar, operating in my home province. From there, it was a process of investigating each one, noting their fees, interest rates, and any benefits or bonuses offered. Once I began to compare them in an informational battle royale, only one victor remained. Of course, now that I’m working for Ratehub, I realized I could have saved a lot of time using their handy table to compare chequing accounts.
Opening a bank account online
After finding the best bank for you, it’s time to open an account. While you can still walk into your local branch and do this in person, concerns around the spread of COVID-19 have resulted in more and more people going the online route. Thankfully, most institutions have made this process relatively quick and painless. Simply follow the directions provided on your bank’s website and make sure you have all your necessary documents.
What is needed to set up a bank account
In order to set up your new account, you’re going to need to provide proof of identity. A valid Canadian driver’s license and passport are the most straightforward option, but if you don’t have either of those (or only one), here are some other documents you can use:
- Birth certificate issued in Canada
- SIN card issued by the Government of Canada
- Certificate of Canadian Citizenship or Naturalization
- Permanent Resident card or an Immigration, Refugees and Citizenship Canada (IRCC) form IMM 1000, IMM 1442, or IMM 5292
It’s worth noting that, while a SIN isn’t required for most chequing accounts, you may need to provide one to open an interest-earning savings account.
Keep Your Old Account Open
NOTE: Don’t close your old account before opening your new one. Experts agree it’s a good idea to open your new account no less than two weeks before beginning to transfer your money. This is because it can take up to ten days to receive your new debit card in the mail, so you want to make sure you’ve still got access to your outgoing card (and a certain amount of connected funds) in case of any delays. As a bonus, this will also give you some extra time to set up your login credentials and familiarize yourself with your new bank’s online services.
Once everything is in place, begin by transferring a small amount of funds into your new account to make it active
Will switching bank accounts affect your credit score?
As long as your old bank account is in good standing at the time of closure, there's no reason that switching accounts should have any effect on your credit score.
The only way your score will take a hit in this situation is if you owe an outstanding balance to your old bank before closing your account. Much like any other existing debt, this will take points off your score, but the simple act of switching accounts itself won't hurt.
How to set up automatic withdrawal:
If you’re like me, you’ve got several automatic withdrawals and recurring charges in your chequing account. Between internet, hydro, Spotify, Netflix, and a slew of others, I had a lot of service providers to update with my new banking information. Unpaid bills can lead to lower credit scores, and I didn’t want that. Conversely, a paycheque from work bouncing back because I didn’t give HR my new account info would have been a headache no ibuprofen could cure.
Feeling overwhelmed? To reduce a stressful task, create a master list of each service provider, subscription service, and employer that needs your updated information. We’ve provided a downloadable template you can use below:
With most subscriptions, you can switch your banking details online, but when it comes to more essential services such as internet or hydro, some still require you to mail them your new information the old-fashioned way. Just remember to place an additional phone call after a couple of weeks to make sure your changes were received.
To update your employer with your new account, you’ll most likely need to contact their HR or payroll department and provide a new void cheque or direct deposit form as well. In either case, you can use our downloadable template below:
Some institutions even provide a downloadable PDF of a void cheque with all your account information, making the process easy and efficient.
Also, if you’re someone who uses online payment platforms such as Venmo or PayPal, make sure your new banking information gets included in those accounts as well to avoid any frustration when making online purchases.
Begin using your new account
Getting my brand new debit card in the mail made it feel official: I was moving on. After giving my updated information to everyone who needed it and transferring a small chunk of money into my new account, it was time to take my card for a test drive.
I started small, using it to purchase everyday items like groceries and toiletries. My first debit transaction went through with no issues; sweet relief. The hardest part was now over.
But don’t close your account yet. Instead, leave it open for a few months as insurance against any automatic withdrawals or recurring payments that may have slipped your mind. This kind of thing happens more often than you’d expect, so it’s good to still leave a bit of money behind during that time to handle any surprises.
How to close a bank account
Brimming with confidence in my new account, I was ready for the last step: closing my old one for good. I began by transferring the rest of the money over to my new bank, then called my old bank to let them know I was leaving. They tried to lure me back with temporary rewards and incentives, but my mind was made up.
Make sure to ask about any potential last-minute fees and get written confirmation of account closure. This will protect you in case of any administrative errors. Even still, some banks may reactivate your account due to an unexpected automatic deposit, so it’s a good practice to call them after a month has passed to verify that your closed account hasn’t changed its status.
The bottom line
While the idea of changing financial institutions can seem scary, the financial benefits of higher interest rates and lower fees far outweigh the time and effort it takes. For example, my decision has earned me $450 over the last year. If I were getting paid to switch banks and it only took me two hours to accomplish, that’s $225 per hour. Since I left my old bank for one that aligned with my current needs, I’ve never once looked back or regretted it, and I’m reminded of the good choice I made every time I look at how much I’ve saved.
Like anything else, going in prepared and educated will make the entire process infinitely easier, so download our templates, use our comparison tables, and leave a comment below telling us how much money you’ve saved.