Is it time to break up with your bank? If you want lower fees, better interest rates or just a higher standard of customer service than you get from your current bank, switching banks in Canada is easier than you might think.
In this guide, we’ll show you how to switch banks in six simple steps – and what to consider before deciding whether the grass really is greener on the other side.
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Will Canadians switch banks in 2023?
Results from the recent Finder: Consumer Sentiment Survey Q1 2023 report, where just over 1,850 Canadians were asked about the financial plans and priorities for 2023, found that just over 1 in 10 Canadians (11%) planned to switch banks this year.
The top three reasons for switching banks were:
- To eliminate transaction fees (11.9%)
- Find a bank account with a higher interest rate (10.5%)
- Get cash back rewards (10.1%)
Plenty of reasons for switching banks
While transaction fees, higher interest rates and cash back rewards may be the main reasons for switching banks, Canadians will often switch banks for a variety of reasons, such as:
- Lower fees. Looking for a chequing account with low or no monthly fees? You could find what you’re looking for at another bank and save hundreds of dollars a year.
- Better interest rates. Make your money work harder for you by switching to a bank that offers a higher interest rate on your savings. You might be surprised how much difference a 0.5% rate increase can make to your balance.
- High-quality customer service. Tired of spending hours on hold waiting to speak to a customer service rep? Why not switch to a bank that makes customer service a priority?
- Special offers. Banks offer a range of deals and discounts to entice new customers. These switching banks promotions can include waived fees, bonus interest rates and cashback offers that put more money in your pocket.
- Easier access. Switching banks allows you to choose a bank with more branches in convenient locations, longer opening hours and a larger ATM network – all of which can make managing your finances much easier.
- Better banking experience. If you do most of your banking online or via your mobile, you can switch to a bank that offers user-friendly online banking and an intuitive mobile app.
- Combining your finances. If you’re in a long-term relationship, you and your partner might decide to combine your finances into a joint account.
How to switch banks in Canada
Ready to change banks? Follow these six steps to find the perfect bank and make switching banks a breeze:
Step 1: Identify the primary reason for switching banks
Why are you unhappy with your current bank? What key features are you looking for that it doesn’t provide? Whether you want lower fees, better customer service, or to earn more interest on your savings, zero in on exactly what it is you want in a bank. Put together a checklist of the most important features you’re searching for and then use it to help you compare banks.
Step 2: Choose your new bank
Now you know what you’re looking for, shop around to find banks that fit the bill. From banks and credit unions to online neobanks, there are plenty of options to choose from.
Always remember the key banking features you value the most. Keep an eye out for special offers to help make switching banks financially worth your while.
Step 3: Open an account
When you’ve found your perfect match, apply online to open an account. You’ll need to provide your name, address, contact details, proof of ID and (if opening a savings account) your Social Insurance Number (SIN).
You can also sign up for online and mobile banking, download your new bank’s smartphone app and deposit money into your account.
Tip: Don’t close your old account right away. It could take a week or more for your new account’s debit card to arrive in the mail, and there may be other hiccups with your new account. By leaving your old bank account open for a couple of weeks or months, you can use it as a backup, just in case. Of course, be aware that if your balance drops below your old bank’s minimum requirement, you may be charged a monthly fee.
Step 4: Transfer your direct deposits and debits to your new account
Make a list of all the automatic payments to and from your current account. That covers your salary, streaming subscriptions, rent, insurance premiums, and other regular payments. Go back through your past bank statements to make sure you don’t miss any.
You can then move all those payments over to your new account. This may involve contacting the company directly, such as informing your employer of your new bank account details or logging into your subscription accounts to update your payment information.
Step 5: Start using your new bank account
Now that your new bank account is up and running, start using it. If it’s a savings account, you might want to set up a recurring transfer to help grow your balance. If it’s a chequing account, use it to receive your income, pay bills and make everyday purchases.
Once again, it’s important not to close your old bank account yet. There may be a long-standing pre-authorised debit payment you’ve forgotten to transfer to your new account, so keep it open for a couple of months and check statements for anything you’ve missed.
Step 6: Withdraw money from your old bank account and officially close the account
The final step is to transfer the remaining balance out of your old account and then close it. You’ll need to contact your old bank and ask it to close the account. You may be able to do this via live chat or over the phone, but some banks may require you to visit a branch and provide proof of ID.
And that’s it – you’ve now successfully switched banks.
What to know before switching banks
Before you switch banks in Canada, there are a few risks and drawbacks to be aware of:
- Fees may apply. Your old bank may charge an account closing fee. Transfer fees may also apply when you move funds out of certain types of accounts. More on this in the next section.
- Introductory offers only apply for a limited time. Switching to a new bank with a great interest rate or waived monthly fees can save you money, but remember that these offers only last for a limited time. Once the promo period ends, you may not be getting a better deal than you have with your current account.
- Check what’s included. Switching to a chequing account with a lower monthly fee doesn’t necessarily mean a better deal. For example, monthly transaction limits may apply, or your new account may charge additional fees for in-branch transactions or if you don’t meet minimum balance requirements. And if you’re switching to a savings account with a higher interest rate, you might need to deposit a minimum amount each month to earn the maximum rate.
- Bank switching offers have strict terms and conditions. Introductory offers usually require you to keep a bank account open for a specific period – if you close it early, you’ll lose the bonus. This limits how often you can switch accounts while still getting bonus offers. Introductory offers are also usually only available for new customers.
- Your current bank may match the offer. If you’ve found a great savings account interest rate elsewhere, it could be worth contacting your current bank to let it know you’re thinking of switching. It may be willing to offer you a better rate to keep you on board.
Are there any fees for switching banks?
Maybe. Maybe not. Unfortunately, switching banks sometimes comes at a cost.
Check the terms and conditions of your current account to find out whether an account closing fee applies. Be aware that some banks charge fees if you ask your bank to transfer the remaining balance in your account to another bank rather than transferring the funds yourself.
Some banks also charge account closing fees to discourage people from regularly switching banks. For example, you may be charged a $15 to $20 fee if you close a bank account within 90 days of opening the account.
Finally, be mindful that some bank accounts come with additional fees and costs. For instance, if you transfer funds out of a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP), you may be hit with withdrawal fees that range fro $50 to $150, per transaction. Be sure to read the account fine print or talk to an account representative before taking action, in order to avoid or reduce transaction fees.
What documents do I need to switch banks?
If you switch banks, you’ll need to provide documentation when you open an account with your new financial institution. You’ll need to provide proof of ID along with your name, date of birth, address and contact details.
Two forms of ID are required to open an account. Acceptable documents include:
- Canadian driver’s licence
- Canadian passport
- Canadian birth certificate
- SIN card
- Provincial or territorial health insurance card
- Certificate of Canadian Citizenship or Certification of Naturalization
- Permanent resident card
- Debit card or credit card with your name and signature on it
If you’re opening an interest-earning savings account, you’ll need to provide your SIN. However, you can open a chequing account without your SIN.
Find out more in our guide on the requirements to open a bank account.
Will switching bank accounts affect your credit score?
No. Simply switching from one bank to another will not affect your credit score. You won’t need to complete a credit check to open a new bank account unless you’re also applying for a new credit card as part of a promotional offer to encourage you to switch banks.
However, your credit score could take a hit if you owe money to your old account and neglect to pay the amount owed. For example, if your account is in overdraft when you decide to change banks, your old bank could sell your debt to a collection agency. This situation can hurt your credit score and the default is listed on your credit report.
How to close a bank account
The easiest way to close a bank account depends on the type of account and the bank. In many cases, breaking up with your bank over the phone or via live chat may be possible. However, some banks will require an in-person branch visit and provide proof of ID before you can officially close a bank account. Just remember to check the fine print first to know whether your preferred option could incur a fee.
Don’t be surprised if your old bank tries to entice you to stay with a special offer or discount. It may offer to waive your monthly account fee, for example, or boost your savings account interest rate. By all means, hear out the offer. If it’s a good offer, you may reconsider switching banks. But be aware that such discounts usually only apply for a temporary period. If you’re sure you’ll still get a better deal elsewhere, stick to your guns and follow through with switching banks.
Tips to maximize your savings power
Switching banks to maximize your savings does have its drawbacks. But if you’re willing to spend a few hours reading the fine print, switch bank promotions in Canada can help you build a bigger nest egg.
Here are a few more tips to give your balance a boost:
- Consider the standard variable rate. If you’re going to keep the account past the promotional period, a big cash bonus or high introductory rate might not be worth it if the standard interest rate is low. Also, with cash bonuses, the introductory bonus when you switch banks isn’t always high enough to justify the account’s low interest rate.
- Look beyond the Big Five. To find the best interest rates, you’ll have to be willing to look beyond the big players in the Canadian banking industry. Compare online savings accounts and challenger banks for the best rates.
- Read the fine print. To successfully move banks and avoid any unexpected fees and restrictions, you’ll need to be willing to commit a few hours of your time to read through lengthy terms and conditions documents for different accounts.
- Be strong. Remember that you’re switching banks to maximize your savings, so don’t feel restricted by any sense of loyalty to your bank. Unless it’s offering a better deal than you can find elsewhere, stick to your guns and look for the best value for your money.
- Set up a recurring deposit. Automate your savings by setting up a regular transfer from your chequing account to your savings account. This will help you grow your bank balance at a steady rate.
Survey methodology
The results of the Finder: Consumer Sentiment Survey Q1 were collected through an online Pollfish survey conducted in January 2023. The survey asked 1,846 Canadians from across the country about their money habits and financial priorities for the new year. The estimated margin of error for the survey is +/- 3%, 19 out of 20 times.
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