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Switching to a new bank can help you cut down on fees if you’re not happy with how much your current bank is charging you. The only problem is that before you head out the door, your old bank could slap you with a few extra charges as a parting gift. Before you get ready to move your accounts, it’s important to know which fees to watch out for when you do.
A financial advisor can help you create a financial plan to reach any goals you may have.
1. Account Closing Fees
Some banks impose a penalty on customers who close their accounts when they’re relatively new. If you haven’t had a checking or savings account at your current bank for very long, there’s a chance that picking up stakes and heading somewhere else isn’t going to come cheap.
Say your bank charges an early account closing fee. You may be able to avoid it by leaving the account open temporarily while moving your money over to your new bank. If you’re planning to go this route, you’ll need to leave enough cash in the account to dodge the minimum balance fee (if your bank charges one). Otherwise, you may just have to pay the fee.
In some cases, it’s possible for a bank to reopen a closed account when a deposit is made. For instance, this could occur if a credit is applied back to your account or you have an ACH payment or direct deposit set up that you forgot about. Typically the bank can choose to reject the payment and send it back to its issuer, but that doesn’t always happen. If a deposit is allowed to go through, you could be racking up fees without even realizing it.
2. Monthly Maintenance Fees
Many banks charge a monthly service fee if your balance falls below a certain threshold. The Chase Total Checking Account, for example, charges a $12 fee if your minimum daily balance dips below $1,500 unless you make a qualifying direct deposit or you’ve linked up your savings. When you’re in the process of closing an account, meeting those requirements might be impossible. That’s where the fee comes in.
If you want to avoid this fee, you should consider a bank that simply doesn’t charge it. For example, you would not have to worry about a monthly maintenance fee with either a Barclays savings account or an American Express high-yield savings account.
3. Overdraft Fees
One of the biggest money makers for banks is overdraft fees. According to the Consumer Financial Protection Bureau, banks generated more than $5 billion in overdraft fees in 2023. If you start shuffling money from one bank to another because you’ve decided it’s time to make a switch, it’s easy to get hit with an overdraft fee if you’re not careful.
Making sure that you switch over or cancel any automatic payments you’ve got linked to the account is a must, but you also need to give any checks you’ve written time to clear. If you forget about something and it’s processed against a zero balance before the account is fully closed, the bank will likely lay an overdraft fee on you. Some banks can even charge as many as six overdraft fees in a single day if you have multiple transactions returned due to insufficient funds.
4. Wire Transfer Fees
If you want to move money from one bank to another without having to go into a branch, you can arrange for a wire transfer, but in most cases it’ll cost you. Domestic wire transfer fees are usually lower than foreign transfer fees but in some cases, you can still expect to pay anywhere from $15 to $35 for this service.
5. Cashier’s Check Fees
Opting for a cashier’s check instead could allow you to sidestep a transfer fee, but it has its own price. Even though you’re drawing the funds from your own account and the check doesn’t look much different from a regular one, your bank may still charge you as much as $10 just to get your money this way.
How to Avoid Fees When Switching Banks
Switching banks doesn’t have to be costly, if you plan ahead. Start by keeping both your old and new accounts open for at least a few weeks to allow for a smooth transition. This gives you time to update your direct deposits, such as paychecks or government benefits like Social Security, and to move any automatic payments linked to your old account. If you close the account too soon, you risk overdraft fees or returned payments.
To avoid early account closing fees, check your current bank’s policy. Some banks charge fees if you close an account within the first 90 to 180 days. If you’re within that window, it may be smarter to leave the account open temporarily and avoid transactions that could trigger other fees.
Minimize the chance of monthly maintenance fees by maintaining the minimum required balance in both accounts during the transition. To steer clear of wire transfer or cashier’s check fees, consider using free internal transfers through linked bank accounts, which are usually available through online banking.
Lastly, verify your old account won’t be reactivated by incoming deposits, a risk if you forget to update a direct deposit. Monitor the account for 30–60 days post-switch.Consider creating a simple checklist to keep track of which bills, deposits, and accounts need to be updated. Taking these precautions can make your bank switch seamless, and fee-free.
Find out now: Which checking account is best for me?
Bottom Line
Switching banks can be a smart move, especially if you’re looking to escape high fees, access better interest rates, or take advantage of modern banking features. But without careful planning, you could end up paying even more in the process. From early account closing penalties to surprise overdraft charges, there are several hidden costs that can trip you up. By understanding these common fees and taking proactive steps to avoid them, you can ensure a smooth and cost-effective transition. Take the time to map out your move, update your automatic transactions, and track your accounts. A little preparation goes a long way.
A financial advisor can provide further insights into the types of checking and savings accounts that best fit your lifestyle and long-term goals.
Savings and Banking Tips
- A financial advisor can help you build a long-term financial plan, which can account for your savings. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Interested in seeing what kinds of savings rates are available on the market today? Check out SmartAsset’s rate table to learn more.
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