4 Common Budgeting Mistakes
- No specific motivation
- Unrealistic spending estimates
- Overlooked expenses
- Too many restrictions
Do you remember the last time you walked into a physical bank branch? If you can’t, or a bank visit is a rare occurrence, you may be pleased to know there are alternatives if you’re looking to replace your brick-and-mortar checking account. Enter online banking.
“Increasingly, our clients tell us they rarely go to bank branches anymore,” says Andrew Wang, managing partner at Runnymede Capital Management, a financial management firm based out of Mendham, New Jersey.
Wang’s observation is also backed by research. According to a 2018 study by PwC, an accounting services firm, 20 percent of consumers prefer to bank online, another 15 percent prefer to bank from their mobile device and 14 percent prefer to use a combination of both online and mobile banking.
Even if research shows consumers are trending toward digital-only banking, you might still be wondering if online banking is right for you. Learning how to switch banks may feel like a time-consuming process on top of your already packed schedule.
Good news: It’s actually quite easy to move a checking account to a new bank, including to an online bank. And regardless of how simple it is to replace your brick-and-mortar checking account, there are plenty of perks that come with making the switch to online banking that could be worth your while. The digital age has made it pretty straightforward to do things like set up a direct deposit and switch bill pay to a new bank.
If you’re asking, “What are the steps to move my checking account to an online bank?”, consider the following:
First things first: Why do you want to move your checking account to a new bank? Identifying why you’re making the switch in the first place will help you find an online checking account that meets your needs.
Maybe you want a higher interest rate. Or maybe you want rewards—an account like Discover Cashback Debit lets you earn 1% cash back on up to $3,000 in debit card purchases each month.1 If you’re looking to replace your brick-and-mortar checking account, you’ll also want to consider any potential fees and if your new account has FDIC insurance.
Once you’ve decided which online checking account to open, you’ll need to fill out an application. You may be asked to provide a few basics—like your address and Social Security number—and you can provide a starting balance and fund your account by transferring money from an existing one. You should also find instructions for setting up your online and mobile account access.
From there, it’s time to move on to other aspects of financial management.
If you’re determining how to switch banks, consider other features that could help you manage your checking account and budget. Automating your finances, for example, can be an easy way to stay on track toward your financial goals. It helps put systems in place that can all but eliminate human error.
“Systems beat out human beings when it comes to consistency. They don’t get tired or sick or lose motivation,” says Tiffany Aliche, founder of The Budgetnista, a financial education website. “Systems also don’t make irrational financial decisions based on emotion,” she adds. If you have your employer directly deposit your paycheck into your checking account, you don’t run the risk of losing a check (where’d that thing go?) or forgetting to make the deposit on your own.
If you have your employer directly deposit your paycheck into your checking account, you don’t run the risk of losing a check or forgetting to make the deposit on your own.
Sold? Making sure you have direct deposit when you move a checking account to a new bank is easy, whether you’re new to direct deposit or have been using it for some time. You may have to notify your employer and give them an authorization form with your new banking information, including your account and routing numbers. You can get this authorization form from your new bank. Your employer may also have their own form for you to fill out.
When you move your checking account to a new bank, you’ll also need to switch bill pay to your new bank so recurring expenses don’t slip through the cracks.
Log into your current checking account and view all of the recurring bill payments you have scheduled. If these have been running on autopilot, it could be easy to forget some of those smaller payments that come out of your checking account on the reg. Next move over to your new online checking account and find the bill pay option, and follow your account’s instructions to set up bill pay for each of your expenses.
Online bill pay is something financial advisor Susan Jensch does with her own accounts.
“Setting up online bill pay has been really beneficial for me because it helps control my cash flow,” she says.
Instead of randomly scheduling her bill payments and running the risk of an overdraft, she makes sure to schedule them right after bi-weekly deposits hit her checking account. This way, she knows there is enough money in the account to cover them.
“It works out that my mortgage and car are paid when the first paycheck hits. My credit card and some other bills come out two weeks later, since those payment dates are more flexible,” Jensch adds.
When moving a checking account to a new bank, you may want to consider setting up automatic transfers to your savings account. Aliche, the founder of The Budgetnista, encourages her audience to create multiple savings accounts—one for each goal—and then to set up automatic transfers into each. You may have one automatic transfer into your savings account for your emergency fund, for example, and another transfer set up for your savings account earmarked for vacation expenses.
You can set up your automatic transfers by logging into your online checking account. You’ll need to select which account should receive the transfer, the amount of the transfer and the cadence for the transfer (think weekly, after each paycheck, or monthly).
“Setting up online bill pay has been really beneficial for me because it helps control my cash flow.”
With the streamlined processes that online banks provide, learning how to switch banks is simple. Both Wang and Aliche agree, online banks can provide perks and flexibility that help you automate your finances and reach your financial goals.
1 ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPal™, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries. Venmo and PayPal are registered trademarks of PayPal, Inc.
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1 “Expenditures on Children by Families, 2015,” Revised March 2017, Center for Nutrition Policy and Promotion, United States Department of Agriculture.
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