Your banking needs will likely change as you mature and evolve. You may move to a new state or country, locate a bank with better interest rates or get serious about eliminating fees as part of a long-term savings strategy. In any case, your current bank account may no longer serve your needs, creating a scenario that calls for closing an account. Luckily, switching banks doesn’t need to be complicated -- so long as you tie up all your loose ends before pulling the plug on your old account.
First, you’ll need to open a new bank account to move your money into. For a smoother transition, update all your recurring deposits and payments to use your new account’s information before closing your old one.
Finally, confirm that your old account is in good standing -- meaning you don’t owe the bank any unpaid overdrafts or fees -- and you have no pending transactions. Once everything is in good order and you’ve set up your new financial home base elsewhere, you can contact your bank to close your old account. Here’s how to do it.
How to close a bank account
1. Open a new bank account
Unless you already have another bank account aside separate from the one you’re closing or you want to leave the banking system for good, you’ll need to open a new account at another bank before you close your current one. This will ensure you have a place to keep your money, receive direct deposits and make automatic payments or debits.
Many banks offer online applications, while others require you to apply in person at a branch. However you apply, you’ll likely be asked to provide some personal information -- such as your name, birthday and Social Security number -- and identifying documents.
2. Cancel recurring payments and direct deposits
Before canceling your old bank account, ensure all your monthly deposits and payments are set up with your new account. These may include:
- Payroll or direct deposits
- Bill payments and automatic transfers
- Subscriptions, gifts or recurring donations
- Credit card payments or transfers
- Loan or mortgage payments
When someone sends a direct deposit to a closed bank account, the bank will typically return the funds to the original sender. For example, if you cancel your old bank account but don’t give your updated direct deposit information to your employer, your paycheck will be sent back to your employer and you may have to contact them (or your old bank) to recover your money.
3. Transfer or withdraw your money
Next, transfer all the money from your old account to your new one, or withdraw it as cash. Make sure any pending transactions have cleared before you do so. Otherwise, you could be hit with an overdraft fee if a previously pending transaction goes through after you’ve already drained your account balance, sending your account into the negative. Additionally, if your old bank charges a maintenance fee if you don’t maintain a minimum daily balance, you’ll want to close your old account shortly after transferring out your money to avoid a fee.
4. Contact your old bank
Call your old bank or send a secure message through your online banking portal to confirm there are no pending transactions or outstanding charges and the account balance is zero. Then you can ask the bank to close the account.
Some banks require written notice that you want to close your account. If that’s the case, ask your bank for a template form requesting account closure. Each bank may have its own requirements about what information needs to be present in the letter, but your full name, account number, bank name, date and Social Security number are likely to be on the list. Other banks may let you close your account over the phone or online.
Be sure to ask for written confirmation that your account is closed and save a copy for your records.
How to close an inactive bank or overdrawn account
If your bank account has a zero balance with no activity -- such as deposits or withdrawals -- for a long time, the bank may consider it dormant or inactive. Sometimes, the bank will close an inactive account automatically after a certain amount of time has passed. Other times, you may need to contact customer service to reactivate your account, and then close it manually.
If your account has been overdrawn, you may need to pay back the overdrawn balance and any outstanding overdraft fees to bring the account current. Before you can close your account, your balance needs to be at zero or higher.
It could take anywhere from a few days to a few weeks for the bank to confirm that the account is in good standing and that any outstanding issues have been resolved. Then you can follow the steps outlined above to close your account.
Does it cost anything to close a bank account?
Depending on the terms of your banking agreement, you may be charged a fee to close your account. The most common form of this is an early account closure fee, which is charged when you close your account too soon after opening it.
According to CNET sister site Bankrate, early account closure fees are most commonly charged on accounts closed within 90 days of opening and typically range from $5 to $50. Early account closure fees can be found on savings, checking and money market accounts.
Certificates of deposit typically charge an early withdrawal penalty if you withdraw your principal before the term is up.
Does closing a bank account hurt your credit?
Unlike credit cards, bank accounts aren’t included on your credit report. Closing a bank account in good standing has no direct impact on your credit.
If you leave an account with a negative balance for too long, the bank can send the account to collections. In this case, your credit score can be hurt as this action will likely be reported to the credit bureaus.
Can you close a bank account online?
Some banks allow you to close your account online, whether on your own through your online banking portal or by contacting a customer service representative through an online channel such as chat or email. But if your bank doesn’t offer an option to close your account online, you can usually do so by calling your bank or visiting a local branch.
The bottom line
Closing a bank account can be a long process with unexpected complications, or it can be quick and painless. It all depends on whether you’ve made the necessary preparations before you contact the bank to formally close your account. Withdraw your funds and reroute all your scheduled transactions so you don’t have any interruption in accessing your money.
Make sure that your old bank account is in good standing, meaning there are no negative balances or outstanding fees you owe, when you close it. Otherwise, you may find yourself encountering unexpected difficulties or complications when opening new accounts in the future.
Correction: An earlier version of this article was assisted by an AI engine and it used some phrases that were not entirely original. Those phrases were replaced. This version has been substantially updated by a staff writer.
As an expert in personal finance and banking operations, I've navigated the intricacies of banking transitions for many individuals, ensuring a seamless process. My deep understanding of financial systems and regulations has equipped me to guide others through the complexities of managing and closing bank accounts.
Now, let's delve into the concepts presented in the article:
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Opening a New Bank Account:
- The article rightly emphasizes the importance of having a new bank account before closing the old one. This ensures continuity in financial transactions.
- Mention is made of the various ways to open a new account, such as online applications or in-person visits to a branch. This reflects the evolving nature of banking services.
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Canceling Recurring Payments and Direct Deposits:
- The article advises updating all recurring deposits and payments to the new account. This is crucial to avoid disruptions in services like payroll deposits, bill payments, and subscriptions.
- Examples of recurring payments are listed, including payroll deposits, bill payments, subscriptions, and loan or mortgage payments.
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Transferring or Withdrawing Money:
- Clear instructions are provided to transfer or withdraw money from the old account to the new one, emphasizing the importance of ensuring pending transactions have cleared to avoid overdraft fees.
- Considerations for potential maintenance fees on the old account are highlighted, encouraging users to close the account promptly to avoid fees.
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Contacting the Old Bank:
- The article guides users on contacting the old bank to confirm no pending transactions, outstanding charges, and a zero account balance before initiating the closure process.
- Different methods of closing an account are discussed, such as calling the bank, sending a secure message online, or, in some cases, providing written notice.
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Inactive or Overdrawn Accounts:
- Information is provided on handling inactive or overdrawn accounts, including reactivation procedures and the need to bring the balance to zero before closing.
- The timeline for the bank to confirm the account's good standing is acknowledged, contributing to a comprehensive understanding of the process.
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Closing Costs and Impact on Credit:
- The article mentions potential fees associated with closing a bank account, particularly early closure fees. This aligns with common banking practices.
- Unlike credit cards, closing a bank account does not directly impact credit. However, leaving an account with a negative balance can lead to collection actions and negatively affect credit scores.
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Online Account Closure:
- The possibility of closing a bank account online is discussed, reflecting the evolving trend of digital banking services. Different methods, such as online banking portals or contacting customer service through chat or email, are outlined.
In conclusion, the article provides a comprehensive guide on closing a bank account, covering essential steps, potential complications, and considerations for a smooth transition. Users are educated on the importance of preparation to avoid unexpected difficulties in their banking endeavors.
