Lesson 3: How to switch to a new savings account
If you’re keeping up with the Basics of Saving in the finder.com.au course (Savings 101 and Savings 102), then you might be asking yourself how you should go about setting up the Optimum Savings Model. It’s not hard, but it can take time and requires a few things to get started:
- A computer with an active Internet connection – it would suck if you got halfway through your application and didn’t get to finish.
- A printer with ink (just in case) – there may be some paperwork that you need to physically fill out (so you’ll need a pen and paper too).
- Personal details at hand – this includes basic information like your name, DOB and address, as well as your occupation status and employer name, plus your Tax File Number (TFN).
- Identification – this can fall into a few categories and different banks will ask for different documents. Some banks run on the "100 points of identification" system. Make sure to read up on what types of identification each bank will accept. Typically, a current Australian driver’s licence will suffice.
Once you’ve got all this at hand, you’re ready to get this application started!
If you're trying to follow our Optimum Savings Model (which is outlined below), to make the most of your money's interest-earning capabilities, you'll have to go through step seven every four to six months, as your account outlives its introductory interest rate.
As your introductory rate on one high interest savings account runs out, you can simply port your money over to a new account and always enjoy the highest interest rate. You could lose out on 1.50% p.a. or more on your savings' interest rate if you leave your money in the account once the introductory interest rate is up.
Determine which transaction accounts and high interest savings account combo best suits your needs. Once you’ve picked which one you’ll be going with, it’s just a matter of clicking through to the bank’s website and starting the application process.
2. Apply online
You will be charged the full amount of tax on your interest if you don't supply your Tax File Number – make sure you've got it at hand when you're filling out your application, or be sure to supply it afterwards if you don't.
No matter which bank you decide to go with, the process is essentially the same. You’ll be asked a few standard questions, like your name, address and so on.
3. Or print and fill out the form
Download the bank’s application form and fill it out. Fill out the form as you would any other. You’ll probably be given an online application number to use on the form so that you don’t have to fill out all your personal details again. Once it’s filled in, you’ll have to sign and date it.
4. Confirm your identity
You’re going to have to get your identity checked before you can lodge this application. Things will go faster and smoother if you head into the local branch of the bank you’re applying with, but a post office will do fine. They will check your identity documents, sign off on them and lodge your application.
Some banks will open your account there and then if you go into a branch and sign up directly. Otherwise, you might be waiting a week until you get your BSB, account number and online banking codes in the mail.
A few banks will even let you confirm your identity online, saving you time and the hassle, so make sure you check out your new bank’s requirements before you start your application.
Either way, you’ll have to wait for your card and pin number to arrive in the mail (which can also take a week or more) before you can start using your money.
You’ve been a trooper so far, filling out all the paperwork and lodging your application. Before you can enjoy your new account, you’re going to have to wait a bit. There is a handful of letters you’ll be getting in the mail shortly:
- Your BSB and Account Number
- Your online banking passcode/username
- Your online banking password/pin
- Your debit/bank card
- Your card’s PIN number
For security reasons, each of these will arrive separately, so it can take over a week before you get the whole shebang. While you’re waiting for the final paperwork to arrive, you can start getting your current bank account ready for closure.
6. Optional: Phase-out your old accounts
Not everyone will want to leave their old bank completely – you may want to keep your old account going for a while for various reasons. If you do plan on closing your account once your new one is up and running, you’re going to have to do a few things first:
- Set up all your direct debits/scheduled BPAY transactions to your new account.
- Change over any online shopping portals that have your card details, like PayPal, ASOS, Amazon, iTunes/Google Play, Spotify and other subscription services.
- Make sure you inform work about your account change and give them your new BSB and Account Number.
- Transfer your funds across.
You don’t have to port over funds manually – when you close your account, you can get the amount that’s still in your account given to you in cash. If you do transfer the funds in advance, it just makes the closure process much easier and quicker for the teller.
Some banks will cap maximum transfer limits to ensure you aren’t transferring thousands of dollars that they’d then be liable for in the event of any misadventure. As such, it may take a few transfers before your account is completely depleted. Allow time accordingly – that is, if you know you’re going to need a certain number of transfers, allow that many days before you organise to close your account.
To transfer all your funds across, you might have to raise your transaction limit. You can do this in a few ways:
- Online: if you have signed up for online banking, you might be able to raise your transfer limit by signing on and adjusting your settings. Some banks will limit this functionality though, allowing you to raise your limit once per day, up to a certain point or only allowing you to lower it online, having to call up or go into your local branch to raise it.
- Over the phone: if you’ve used phone banking before, this might be your best bet. Call up your bank and ask for a one-time raise of your transfer limit to the amount that’s currently in your account. That way, you can transfer all your funds in one go.
- In-branch: if you go into your local branch, your teller will be able to authorise a permanent raise to your limit or a one-time transfer raise, so you can transfer the funds then and there or at your leisure.
7. Set up your HISA
One of the best things about setting up an online high interest savings account (HISA) is that it’s all done on the Internet. You can get yours set up and working in minutes. It’s a much simpler process than opening a transaction account.
If you’re picking a HISA with the same bank you’ve got a transaction account with, you’re going to have to fill out the bank’s online form with the following details:
- Your TFN – unless you want to be charged the full amount of tax on your interest
- Personal details like name, address, date of birth, etc.
- Your online banking account passcode/username
- Your bank account details like BSB and Account Number
- The minimum/opening deposit amount available in your linked account. This amount will be taken directly from the account on the day you lodge the application (when the account is opened) – be sure you have at least that much in the transaction account you plan to link your HISA to. Many accounts don’t require a minimum deposit, but it’s always safe to have a few dollars in your linked account, just in case
If you’ve got all that info and you’ve filled out your details accordingly, you should have your new HISA up and running instantaneously. You will get your account details in the mail later on, but you should be given them once you’ve finished your application process too.
If the bank you’re opening your HISA with is not the same as the one you have your transaction account with, there may be a few more steps involved and it can take a bit longer.
- You’ll have to confirm your identity
- You’ll have to wait until the account is set up
This just means you’ll have to repeat step 4 for this bank and then wait (step 5). You won’t have instant access to your account, but a high interest rate is worth waiting for.
Note: Some banks will only let you open a HISA if you link it to a transaction account that is also with them, not any other bank; make sure you determine if that’s the case before you apply.
8. Optional: Close your old account
Once you’ve got all your account details and your card has arrived in the mail, you’ve set up your HISA and you’ve ported over all your money and scheduled payments, there isn’t much reason to keep the old bank account alive.
To close your account, you’re going to have to go into your local branch. It may sound a bit daunting, but the process itself is quite painless. You’ll only need one or two things to take with you:
- Your bank card
Hand these over, tell the teller you want to close your account and the whole thing shouldn’t take more than 15 minutes or so, under typical conditions.
You will be asked the reason for the closure – be honest. Tell them you’ve got a better deal with another bank or a specific reason why you’re not happy with your current account. They will try to sell you on another one of the bank’s products to try to keep you as a customer. Chances are you’ll be tempted to go with them – stay strong. You compared your products and you picked the best one for you so whatever they’re trying to sell you is likely not something you want. Be firm and stick to your guns.
9. Enjoy your new bank account
You’re now the happy owner of a fresh, new bank account, specifically tailored to your needs and wants (you chose it!).
If you find that, for whatever reason, your new bank account isn’t exactly what you signed on for, that you aren’t 100% happy with it, switch again! Banks cannot hold you as a customer unless you let them.
The switching process may take a while to work through to its conclusion, but you can be much better off if you invest the time and go through with it.
Each bank will have a slightly varied form of this process – make sure you read up on what you will need to sign up and if there are any other steps involved in creating that specific account. Always look into what you need and have to do before you start applying.