How Do You Switch From a Bank to a Credit Union?

Posted May 12 2014
by PenFed Team
Man holding a piggy bank

Maybe your bank has been frustrating you with fees for years or maybe you’ve heard about the benefits credit unions can offer — but whatever your reasons, you’re interested in making a switch. It may seem daunting to make a change in your financial institution, but it’s not as hard as you might think. It does take some time to make the switch, but with a bit of patience you can leave your bank — and all of those fees — behind.

So if you’re thinking to make the switch, follow these steps to make it as quick and hassle-free as possible.

1. Find your credit union

Not just anyone can join any credit union: each serves a different subset of people (or field of membership) that might be based on geographic location, membership in a specific group, or employment. That might make credit unions sound exclusive, but most credit unions will let you join if you have a family member who’s eligible or you make a donation to a related charity. Start your search with the NCUA’s Credit Union Locator.

2. Do your research

Once you’ve found a credit union you’re interested in joining, you’ll want to do your homework to make sure it’s a good match. Look into their rates and fees to make sure the switch makes financial sense. You’ll want to take a close look at how you’ll be doing your banking, too. Check out where your credit union of choice has branch offices and fee-free ATMs, as well as online banking options to be sure that the credit union will meet your needs. Also important is deposit insurance: federally-chartered credit unions will be insured by the Nation Credit Union Share Insurance Fund (NCUIF) for accounts up to $250,000 while state-chartered credit unions may be privately insured — either way, you’ll want to know before you sign up.

3. Open your new account

Talk to your credit union about starting a new account that suits your needs — online, on the phone, or in person — and ask if they have a “switch kit.” Many credit unions will have some kind of switch kit, which contains all of the information you need to transfer direct deposits, set up bill pay, and other essential things you’re likely to need when switching financial institutions. When you open your account, you’ll want to put enough cash in to reach any minimum required balance and avoid fees, but don’t pull all of your money out of your old account just yet.

4. Make sure payments are going to your new account

Many individuals are paid by direct deposit, and one of your first steps should be to transfer any existing direct deposits you have to your new account. Chances are you’ll need to speak to your employer — or anyone else paying you — to make sure your cash is directed to the right account.

5. Change automatic payments

Most of us use online bill payments and have plenty of subscription services — or store accounts — tied to our debit or credit cards. When you change your financial institution, you’ll have to go through the tedious process of setting up automatic bill payments and updating credit card numbers to reflect your new account. Also remember Paypal, which is likely tied to your bank account if you use it frequently. Take care with this step, as any charges directed at your old account can definitely complicate the switching process.

6. Close your old account

You’ll want to be sure all transactions — especially checks — have cleared before you take this last step. It’s not a bad idea to keep your old account open for as long as a month — like with creating your credit union account, you’ll want to be sure to keep any minimum balance required to avoid fees — to make sure that no payments are still associated with the account. Once you’re sure there’s no money coming to or going from the account, you’ll want to call your financial institution to find out what’s required to close the account. Chances are you’ll have to go into a branch office and fill out some paperwork — and your bank will probably try to convince you to stay, but remember that you’re switching for a reason. Stand firm and enjoy your new, lower-fee life!

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