I’ve been Tweeting about this all morning, but I thought I’d make a slightly longer post.
Listen: If you’re in the US and you’d like to close your bank account at one of the big banks in protest in favor of opening an account at a smaller bank or credit union, follow the list of recommended steps here to do it right. Most importantly, open your new account and get it up and running before you close the old account. Because:
- Credit unions can be great, but they don’t work for everyone. Many have strict rules about who can be a member. Many have fee schedules and restrictions that are just as onerous as those of banks. You have to apply to be a member of a credit union – it can take a little time for them to accept you, and they may NOT accept you. Don’t risk financial limbo. Do your homework and get your account set up before you cancel your old one.
- When you open a new account, you might not have instant access to your deposits. When I moved to Chicago and opened a new bank account (with a small community bank, where I still bank today) it took something like 7-10 days for me to have access to my money. Ridiculous? Sure. But very real. Also, sometimes it takes a while to get your new debit card and/or checks in the mail and to transfer automatic payments and direct deposits over. Get all your ducks in a row at the new bank and then close the old account.
- Not everyone qualifies for a debit card! It’s something you “apply for” when you open a new bank account. I think this has broken the brains of some of my Twitter followers outside of the US. Even though it is YOUR money, a debit card is still an instrument of credit and you need to meet a certain threshold of creditworthiness to have one (and/or the ability to write checks). Even though merchants can instantly verify that the money is in your account and technology has shrunk the transaction time between presenting your card for payment and the actual debit taking place, when you pay with either a check or a credit card you are saying “I promise that the money will be in the account when you collect it.” For most of you it wouldn’t really be a problem, but if you’ve been living to paycheck to paycheck, and things have gotten sketchy for you financially, but you currently have a bank account with debit card and everything is in good standing, hold onto that while you set up your new account.
- You need to make sure all of your outstanding financial obligations are met before you close an account. Never, ever shut down an account that is overdrawn. It will profoundly negatively affect your ability to open a new bank account.
- Really audit your own banking needs, habits, and preferences. If you close your account at Big Evil Bank because they instituted a $5/month debit card holder fee, but you’re still using their ATMs twice a week because they have a machine near your house or your workplace and you don’t have time to locate your bank’s ATM, you are “sending a message” to the tune of of giving them an extra $24/month (Assuming $3/withdrawal – in addition to whatever your bank charges for using outside ATMs). Guess you really showed them!
Listen, it’s deliberately difficult and arcane to move your financial life from one institution to another – that’s how they get you. If you’re choosing to surmount that barrier and “vote with your feet,” do it! I just want you to take care of yourself in the process. It’s not a good “I’ll swing by after the protest and knock that out” decision.