You might be using an unsupported or outdated browser. To get the best possible experience please use the latest version of Chrome, Firefox, Safari, or Microsoft Edge to view this website. As your banking needs change, you may find yourself in a situation where you need to close a bank account. Closing a bank account is not complicated, but there are specific actions everyone should take so the account is closed correctly and all of your money is accounted for prior to closure.
Follow these steps when closing a bank account. Closing a bank account involves much more than simply contacting your bank.
Be sure to check with your banking institution for any special requirements that may apply. The first thing you need to do is open a new bank account. Having an account in place ensures you have a place to transfer over direct deposits and any payments or debits. Many factors go into choosing a new bank, including savings rates, fees and account offerings. If you have any direct deposits or automatic payments set up, this is the time to move them over to the new account. Check with your employer regarding any forms you need to fill out if you have direct deposit so they can reroute your paycheck to the new account.
Do yourself a huge favor and make an exhaustive list of all your monthly recurring payments. This could include things like:.
Before you move money out of your account, let any outstanding transactions clear first. This could take up to a month to do. Failure to do so may result in having to pay overdraft fees. If you still have money in the account after everything clears, go ahead and either withdraw the money or transfer it to the new account. Many banks allow you to do this online, but it also could require a phone call to customer service or a visit to your local bank branch.
Some banks may require you to fill out an account closure request form or submit a written request. If there are any remaining funds in the account, you should be able to request a transfer to your new account or receive a check by mail.
The Consumer Financial Protection Bureau recommends that you get written confirmation when you close a bank account. Not all account closures are handled the same. Other scenarios may pop up that require extra steps to close a bank account. Canceling a joint account online could require both parties to log in to the account individually to request account closure.
Your bank account might be leftover from when your parents opened up a custodial account for you. Adulthood brings different banking needs, which may mean moving on from your old account. Some bank accounts, like the Kids Savings Account from Capital One Bank, are automatically converted into a regular savings account when a child turns There might also be an option to do this through your online or mobile banking.
Child support. Back taxes. It may not even be your debt! For Suspicious Activity. A bank can either freeze or close your count for suspicious activity — the results will be different depending on which the bank chooses. To prevent money laundering and terrorism, federal banking laws require that banks report certain types of suspicious activity to the Treasury Department.
Most people have nothing to do with terrorists or organized crime, but certain patterns of behavior or dollar amounts can be automatic red flags in the banking system. You could be the victim of check fraud or account hacking. You could have a joint account with someone else who is in legal trouble or who had suspicious activity in a different account. Many different activities can trigger a freeze:. Large deposits and withdrawals from an unknown source. False or misleading information in your customer record.
Make sure you give a valid address and phone number when you open the account. If you move or your number changes, update the bank as soon as you can. A disconnected phone number is a red flag. Withdrawals against a returned check or a pattern of depositing returned checks.
Be very careful about getting paid by check. If you deposit a check that turns out to be worthless, it could trigger a freeze on your account. If you cashed the check or withdrew some of the money, the bank may think you are committing fraud on purpose. Large transfers of money, especially overseas.
Frequent cash transactions. A lot of honest people get paid or tipped in cash. Unfortunately, criminals prefer cash too.
Multiple accounts in the same name, or frequent transfers. If you have a lot of different accounts, especially if you move money between them frequently, the bank will wonder why. Federal law limits you to six withdrawals from savings accounts per month.
If you often bump up against this limit, it can look suspicious. Deposits from questionable sources. A sudden increase in activity. If your normal pattern of deposits and purchases goes up dramatically, either in frequency or in dollar amounts, the bank may become wary of you. Buying high-risk items or large cash withdrawals. Buying high-risk items like guns, coins, precious metals, or art raises the same question. Out of state or foreign activity. Reports of suspicious activity from other banks.
Banks report customer problems and closed accounts to a central agency called ChexSystems. If you had a problem with one bank, it can affect all your accounts. Suspicious activity freezes can be the trickiest to deal with. Sometimes law enforcement forces the bank to place a freeze. However, if the freeze is based on just one problematic transaction or a recent pattern that got red-flagged by coincidence, you may be able to clear it up by showing where the money came from and what it was for.
A red flag on your account can trigger a freeze, but if you can show your transactions are legal it can usually be cleared up. Remember, the broad discretion built into those customer agreements lets them close an account at any time. In addition to all the suspicious activities that can trigger a freeze, the bank may close your account if you fit a profile of behavior:. Some banks will refuse accounts to customers with a criminal record.
Banks may close or refuse to open accounts for people in certain lines of work, even if the business is legal in the state where they live.
In , the FDIC published a list of business categories that banks were supposed to monitor, and a lot of banks just refused to open accounts for those businesses at all. Potential red-flag businesses include:. Gun, ammunition, and firework dealers;. Online gambling, escort services, and pornography;. Coin dealers;. Payday lending and check cashing;. Medical or recreational marijuana and drug paraphernalia;. Telemarketing and some multi-level marketing systems;.
Home-based charities and advisors on getting government grants. For Administrative Reasons. Banks, like any large company, go through reorganizations. They may close down your branch or stop doing business in your state. You can keep your accounts from going dormant with a few simple steps: review all your accounts regularly, set up automatic transfers in or out of the account, and make sure the bank has your contact information up to date.
For Financial Problems. The Answer…. Too many transfers between accounts. As we explained above, there are legal limits on transfers between some kinds of accounts. Too many deposits of checks that get returned unpaid.
This could happen to anybody once or twice, but you should be very careful who you accept checks from in order to stay in good standing with your bank.
A zero balance or a negative balance. If you owe the bank money or the account is sitting empty, you can be shut down. The answer to what happens to your funds depends on whether your account was frozen or closed. The system works -- most of the time. The chances of your bank failing are extraordinarily small, what about when the unspeakable happens? Your bank could be making some bad decisions and losing a lot of money right now. The bad news is, before you even know it, much of your money may have already vanished.
The good news is that you probably have little reason to worry: You can bank on the United States government to refund at least a substantial portion of your loss. People were easily terrified about what their banks were doing with their funds. As soon as they heard that the local bank was going under, everyone would rush to try to withdraw as much as they could in what's known as a bank run.
Obviously, the bank couldn't possibly return all the money. When bank runs became rampant, President Roosevelt and his New Deal stepped in to try to help. Understanding what the FDIC does and how much you can expect back in the event of a bank failure can help you make smarter choices with your funds.
If you're a depositor at an FDIC-insured bank, you've got a nice safety net of insurance to fall back on even if your bank goes under. You reap the benefits of insurance even though you haven't spent a penny on premiums.
That's because banks pay the premiums for each depositor. These make up the FDIC's deposit insurance fund, which it dips into when it needs to pay back a depositor's loss.
The process goes like this: When a bank fails, the FDIC -- which keeps a close eye on how banks are doing -- swoops in to take charge of the bank in what's called a conservatorship. Although you won't get advance notice, you'll receive a letter in the mail about the closing after it happens. You may even read about it in the newspaper.
If all goes well, the FDIC's takeover will go so smoothly that business carries on as usual. That's because the FDIC is usually able to sell a bank pretty quickly. This entails finding another, healthy bank to assume the failed bank's business. The bank may shut down on Friday and open Monday after the takeover. During this time, you'll most likely still be able to use debit cards , checks and ATM s -- at least up to your insured limit [source: Bruce ].
Direct deposits will automatically start routing to your account at the new bank. You should continue to repay bank loans as usual until further notice.
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