It's easy to think that all the power is in your hands when it comes to your bank accounts. You choose which bank you want to work with, what type of account you need, how much you keep there, and when you take it out.
Banks are eager to hold onto your money, so that's usually how it works. But there are a few situations where your bank may decide it no longer wants to do business with you. Below, we'll look at three of them and what you can do if your bank closes your account.
Three reasons your bank might close your account
Here are three common reasons your bank might close your accounts without your permission.
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Inactivity
One of the most common reasons banks close accounts is because you're not using them. If you haven't deposited or withdrawn money from the account in months or years, your bank may decide to shut it down so it doesn't have to maintain it anymore. Alternatively, they may charge you a fee for inactivity.
Each bank sets its own rules for determining when an account becomes inactive. If you have any questions about this, you can always reach out to your bank to learn more.
Excessive overdrafts
Overdrafts -- withdrawing more money than you have in your bank account -- can result in fees if you have overdraft protection enabled. Doing this once in a while may not raise any red flags with your bank, but if you do so often or you aren't able to get your account back into the positive, your bank may decide to cut its losses and close your account.
This isn't something you usually have to worry about if you don't use overdraft protection, though. In this case, the bank will decline any transactions you attempt to make that exceed your current account balance. However, if the account charges monthly fees you fail to pay, you could find yourself in a similar situation.
Fraud
If your bank catches wind of the fact that you're using your account to scam others out of their hard-earned cash, they'll almost certainly close your account. And that may not be the worst of your problems. This one is pretty straightforward. Don't try to cheat anyone and you won't have to worry about this.
What to do if your bank closes your account
The way you handle a closed bank account will depend in part on why the bank closed it. If it was a simple matter of inactivity, you may be able to contact the bank to negotiate or to open a new account with them. Shopping around for a new account at a different bank is also an option.
Things are more complicated if the bank closed your account due to unpaid maintenance and overdraft fees or because of allegations of fraud. Your bank will probably be reluctant to work with you again, and other institutions might be as well.
Banks report the reason for account closures to an agency known as ChexSystems. This enables other institutions to learn more about your banking history before deciding whether to give you an account.
In the worst-case scenario, traditional banks and credit unions may not want to work with you based on your past banking behavior. If this happens, you may have no choice but to seek out a second-chance checking account.
These are accounts specifically tailored to people who have had bank accounts closed on them in the past. The idea is similar to a secured credit card for those with poor credit histories. They typically carry more restrictions than a standard checking account, including monthly fees you cannot waive. But if you avoid fraudulent activity or negative balances, the bank may invite you to upgrade to one of its regular bank accounts in six months to a year.
Hopefully, you never find yourself in a situation where you need one of these, but it doesn't hurt to understand these rules anyway. And as always, if you have any questions about your bank account's rules, don't be afraid to reach out to the institution and ask. A quick call or email could save you a lot of confusion.
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FAQs
For instance, your bank may suspect you're a victim of identity theft or that your account is engaging in money laundering or wire fraud. Excessive bounced checks or overdraft fees: Banks often close the accounts of customers who frequently bounce checks.
What are reasons your bank account can be closed? ›
For instance, your bank may suspect you're a victim of identity theft or that your account is engaging in money laundering or wire fraud. Excessive bounced checks or overdraft fees: Banks often close the accounts of customers who frequently bounce checks.
What are some reasons a bank might close your account without telling you? ›
They suspect fraud, or it's overdrawn for too long, or you were simply not using it are common reasons usually but they don't ever have to keep customers and don't have to give a reason why they are not, it's always in the terms, all you are entitled to is 30 days notice before closure, you don't own the account and ...
Does a bank have to give you a reason to close your account? ›
Like most other reasons for closing an account, the bank does not have to tell you why your account has been closed, and you only need to be suspected of fraud – and not convicted – for a bank to close the account.
Why are banks abruptly closing accounts? ›
They close down checking and credit-card accounts in part to keep regulators, who are worried about money laundering and other criminal activity, out of their hair. The closures often happen without warning, and chaos ensues when people lose access to their money for weeks and can't pay their bills.
Should I be worried if the bank closed my account? ›
While closing a bank account typically doesn't have a direct impact on your credit score (like, say, having your credit card closed on you), it could become a problem if your account has any outstanding balances, such as unpaid overdraft fees.
Can a bank force you to close your account? ›
Yes. Generally, banks may close accounts, for any reason and without notice. Some reasons could include inactivity or low usage. Review your deposit account agreement for policies specific to your bank and your account.
Can a bank block your account without notice? ›
Banks have the authority to freeze an account if they believe that a transaction in it is questionable. Before freezing, they must, however, notify the holder.
Can a bank refuse to close your account? ›
Generally, the bank will not close a checking account that is in an overdraft status. Such an account will be kept open until it is brought current. Then, the account can be closed. Review your deposit account agreement for policies specific to your bank and account.
Does closing a bank account hurt you? ›
The mere act of closing a bank account doesn't have a direct impact on your credit. The Consumer Financial Protection Bureau confirms that the three major credit bureaus — Experian, Equifax and TransUnion — don't typically include checking account history in their credit reports.
Request your report
The report shows a breakdown of specific accounts closed, outstanding debts, bounced checks and more. You're eligible for a free copy of your report once every 12 months. Request your record in one of these ways: Call ChexSystems at 800-428-9623.
What happens if I send money to a closed bank account? ›
No money will be exchanged. The funds will remain with the sender. If the transfer already took place and an account can't be found, the bank will likely send the transfer back the same way it arrived.
What happens to your money if a bank closes? ›
For the most part, if you keep your money at an institution that's FDIC-insured, your money is safe — at least up to $250,000 in accounts at the failing institution. You're guaranteed that $250,000, and if the bank is acquired, even amounts over the limit may be smoothly transferred to the new bank.
Who is the number 1 bank in America? ›
1. JPMorgan Chase. JPMorgan Chase, or Chase Bank, is the biggest bank in America with nearly $3.4 trillion in assets. It boasts a vast network of over 4,800 physical branches and more than 15,000 ATMs.
What is the safest bank to put your money in? ›
Among the safest US banks, according to Global Finance's November 2022 rankings, are AgriBank, US Bank, CoBank, AgFirst Bank, and Farm Credit Bank of Texas, primarily for those in the agricultural sector.
Is it harmful to close a bank account? ›
Bottom line. Closing a bank account that's in good standing won't hurt your credit score. If you have a negative bank balance, however, it's important to resolve the balance before closing the account. Otherwise, your credit could suffer as a result.
