Front of a bank building with pillars.

How To Transfer Money Between Banks

Kevin Graham5-minute read
December 02, 2021

If you’re looking to transfer money between banks, you may think the process should be simple. After all, it’s your money, not theirs. It’s simple and it isn’t.

The main reason for this has to do with fraud prevention. Although that’s a good thing to have in place, it does create an impediment to controlling your own money, so if you’re doing transfers between banks, you should plan ahead. This post will let you know what you need to do so that you can move your money without a hitch.

Why Would You Move Money Between Banks?

It’s not something you routinely think about, so why would you move money between banks? After all, your decision on which bank to use should be more stable than your choice of cell phone carrier, right?

All that is true, but at the same time, there are some perfectly good reasons you might transfer money as a consumer. We’ll run through a couple of them.

The most common types of accounts that people have are checking and savings accounts. Participating banks and credit unions offer deposit insurance, but it only goes up to a certain amount. Traditional banks are usually members of the Federal Deposit Insurance Corporation, while credit unions are backed by the National Credit Union Administration. Either way, individual accounts are insured up to $250,000 and joint accounts up to $500,000 by one group or the other. This insurance is meant to protect you in case there’s a failure of the bank. If you have more assets than can qualify for insurance, one strategy you can use is to split up the funds between two or more banks so that all the money is insured.

Another key reason you might choose to move money between banks is if you had different banks for checking and savings accounts. There are several online banks now that try to compete by offering higher interest rates on savings accounts. However, you may choose to keep your checking account with a local bank so you can do things like access ATMs if you just need cash around town.

What Is The Easiest Way To Transfer Money From One Bank To Another?

The easiest way to transfer money from one bank to another is a no-tech solution. You walk into the bank you want to transfer the money from and have them issue you a check out of your account. You then make yourself the payee on that check. You take the money to the other bank and put it in the account.

The downside to this is that it’s a runaround and it may only be feasible if you’re transferring to a bank in your local area. If you’re looking to transfer to an online bank or one with very few locations in your state, you may need to look at electronic transfers.

Transferring Money Electronically Between Banks

If your bank has an online presence, it’s fairly easy to transfer money between checking and savings and can be done in less than a day. However, there are some different steps you need to take.

In order to do an electronic transfer, login to the bank you’re transferring the funds from. Find their options for electronic transfers. One of the options should be to initiate the transfer to an external account.

From that point, this will go one of two ways. The transferring bank might ask you to give the name of the bank that will be your recipient and link to the other bank so you can login to that account and authorize the transfer. More commonly, they’ll ask for the account and routing numbers. They then verify the account is yours by doing small test transfers (in pennies) and asking you to verify the amounts. The whole process may take as long as 5 days.

Once the accounts are verified, you should be able to set up electronic transfers between banks. The process does take time, usually 3 business days, but it could be longer. The idea is to prevent fraud by doing some verifications, but the main reason for the delay is that the funds are held up in order to give someone time to report a fraud if one has been perpetrated.

Financial fraud is a major problem. In 2018, the Federal Trade Commission took 1.4 million fraud reports totaling $1.48 billion.

Many banks allow you to do these funds transfers for free, but it’s important to at least look and see what fees you might be charged before moving forward with transfers.

Transferring Money To Other People Electronically

The good news is that if you want to transfer money to other people all electronically, there are any number of services you can use. Square has a phone app called Cash, then there’s PayPal and Venmo. You can also send money through Apple and Google wallets and even Facebook in an instant. The banks even have their own transfer protocol in Zelle.

Some of these services have fees for instant transfer if the recipient needs access to the money immediately. There’s also often a fee if you’re making the transfer through a credit card.

However, all of these apps have transaction limits. If you’re moving a large sum of money to another person, the way to go is wire transfer. You give the transferring service your bank account and routing numbers as well as the wire transfer number of the receiving bank.

Wire transfers can be sent domestically or internationally, but international transfers will likely take longer. There’s also a fee for wire transfer. Banks can do this, but there are also wire transfer services, so be sure to shop around. Banks also have certain policies regarding how they handle wire transfers, so it’s important to be mindful of those and be ready with the information they need.

Be Aware Of Restrictions

Banks may limit the amount of times you can transfer funds. There’s also a federal law that you cannot withdraw from a money market or savings account more than six times per month, so if you’re transferring money to get a higher interest rate, that’s something to be aware of.

There are also penalties for early withdrawal from certain things like certificates of deposit. You also can’t withdraw early from retirement funds and put them somewhere else. In general, to avoid a tax penalty, retirement funds can only be withdrawn for very specific reasons.

Now that you know how to transfer money between banks, let’s supercharge your savings so that you have some money with which to make decisions. There’s an article on saving $1,000 in a month, as well as other articles on our resource center for personal finance.

Kevin Graham

Kevin Graham is a Senior Blog Writer for Rocket Companies. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Rocket Mortgage he freelanced for various newspapers in the Metro Detroit area.