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A bank account is a must-have to manage your day to day finances, but if you’ve been experiencing some financial difficulties or there have been other issues with your account, your bank may close your account.
This is not only inconvenient, but it can be particularly daunting. So, here we’ll explore what to do if your bank closes your account.
What Should You Do If The Bank Closes Your Account?
You will need immediate action as soon as you receive a notification that your bank intends to close or has closed your account.
Having your bill payments rejected or being unable to receive your paycheck will only worsen your financial issues, so you will need to ensure that you can continue managing your money.
1. Stop Your Salary Direct Deposit
You first need to stop your employer from sending your paycheck to your closed account. The bank may hold the funds to cover any overdraft fees or charges if a direct deposit goes into the account.
If your account closes with a negative balance, the bank will use your paycheck to bring the balance to zero, which could leave you with little or no funds to pay your bills.
How To Stop Direct Deposit?
You should contact your human resources department or the payroll officer at your employer immediately to arrange to have your paycheck deposited into another bank account or receive your pay via check.
How you arrange this will depend on your circumstances, but you want to ensure that you can continue to pay your bills and feed yourself while you resolve this situation.
2. Stop Auto Transfers/Payments
Next you need to consider if you have any automatic transfers that are scheduled to leave your account. If you have auto transfers for savings or to other accounts, you will need to stop them.
You will also need to stop any automatic payments for your bills. If these payments are claimed from your account, you could incur overdraft and other fees depending on your bank’s policy.
How To Stop Payments?
It is a good idea to make a list of all the payments that go out of your account automatically, using past bank statements. If these payments are for non-essential services such as streaming services or subscriptions, you should suspend these services until you resolve your banking situation.
For essential services such as utilities, rent, and other bills, you must make alternative arrangements to ensure no disruption to your services.
Remember that if your payments for bills do not go through as they have been claimed on a closed account, you could end up with a greater impact on your credit. These payments may be classified as a missed or late payment, in the worst case, you could end up with a default on your account. So, don’t assume that everything can be sorted later, and take proactive action now.
3. Find Out the Reason for the Account Closure
Once you have sorted out the immediate financial issues, you need to establish the reason for your account closure. This will allow you to have a clear picture of what steps you need to take to bring your finances back on track.
For example, if the account was dormant, it is a very simple issue as it relates to the account not being used. You will have had several letters or emails before the account closure with the opportunity to reactivate the account.
However, there are other reasons which could have a long term impact on your financial health including:
- Lack of funds:
- Excessive transfers
- Negative balance
- Repeated bounced checks
- Identity theft
- Criminal convictions
- Bank changes
- High risk occupations
Customer Service Number
Bank of America
Alliant Credit Union
4. Try to Create a Resolution
If your account was closed due to a negative balance or bounced checks, you will need to try to resolve the situation. While the bank may not reinstate your account, you don’t want the outstanding debt to be passed to a collections agency.
If a collections agency becomes involved, it could have a significant impact on your credit score. So, speak to your bank to find out the exact amount owing and discuss possible resolutions. If you cannot manage to clear the balance in full, your bank may accept a payment plan.
Bear in mind that if you do have a negative balance or have bounced checks, you may continue to incur fees, so it is best to clear the debt as quickly as possible.
5. Check Your Credit
If your bank closed your account because of suspected identity theft, you should check your credit and other accounts to ensure that they have not been affected.
Your other passwords and accounts may have been compromised if someone has hacked your account. So, take the time to go through your statements to ensure that there have been no unauthorized transactions.
If you find any, report these to the appropriate bank or financial institution immediately to minimize the potential damage to your credit.
6. Try Opening a New Account
Depending on your ChexSystems profile, you may have no difficulties opening a new account or it may be more challenging. Some banks are more willing to work with customers with financial issues than others. In some scenarios, you may need a basic account that does not provide a debit card but will allow you to receive your salary and pay bills.
While you may be in a hurry to get a new account up and running quickly, it is well worth taking a little time to investigate and compare your options. Fees, features, and benefits can significantly vary from account to account, so you need to ensure that you open the account that is best suited to your financial situation and requirements.
The Effects of Closing a Bank Account
If your bank closes your account, there are not only immediate issues, but there could be longer-term effects that will impact your financial future. These include:
- Late or Default Payments: We’ve already touched on this above, but if you don’t correctly deal with all the auto payments on your account, there is a risk that your bill accounts may be reported as late or move to default status. This will not only impact your credit, but you could incur late fees and other charges on your accounts.
- Ability to Open Future Bank Accounts: Since the account closure will be reported to ChexSystems, it may impact your ability to open a bank account in the future. Many banks review your ChexSystems report when evaluating your bank account application, which may influence whether you qualify.
- Collections Agencies: If your bank account was closed with an unpaid balance, it could be forwarded to a collections agency if you don't resolve this immediately. This will generate a new debt account that is reported to the credit bureaus, which can appear on your report, impacting your score for up to seven years.
What About the Money I Had in My Account?
If your account had a negative balance when it was closed, your bank will instruct you on how you can resolve the issue by paying in funds via a variety of methods.
If you have money in the account, you will need to check how you will receive the funds. This could be done via check, ACH transfer or other methods depending on your bank’s policies.
If your account was closed due to being dormant, you may need to contact the unclaimed property office in your state to retrieve the cash.
Will I Be Able to Reopen My Bank Account?
Typically, banks will not reopen a closed account. But, if you believe your account was incorrectly closed, you can file an appeal with the bank or complain to the Consumer Financial Protection Bureau.
If the account has been opened for security or transfer issues, the bank may open a new account to replace your old account. This will mean that you’ll receive new account numbers and new cards etc associated with your new account.
How Fast Can I Open a New Bank Account?
How quickly you can open a new bank account will depend on what appears on your ChexSystems report. You can request a copy of your ChexSystems report, so you can see what your bank has said about you. Bear in mind that negative account information can remain on your file for up to five years unless you request it to be removed or your bank updates the file.
If your account has not been reported to ChexSystems, you should not have any issues opening a new account with a different bank. Depending on the bank, you could have your new account up and running in a matter of days.
On the other hand, if your account was reported to ChexSystems, you will have more limited options, which may slow down how quickly you can open a new account. You may need to consider online banks and credit unions, which tend to have more flexibility regarding account opening requirements.
If these are not a possibility, you may need to look at second chance checking accounts, which may take a little longer to open and do tend to have higher fees.
Alternatives When You Cannot Open Another Bank Account
If you are having difficulties opening another bank account, some viable alternatives exist. These include:
- Second Chance Checking Accounts: We’ve touched on these above, but these are basic checking accounts designed for those who previously had banking issues. The accounts tend to have limited features and higher maintenance fees, but they will allow you to pay bills and receive your paycheck.
- Reloadable Debit Card: A reloadable debit card is another option if you cannot open a bank account. Essentially, these cards function like regular debit cards, but you need to “load” with money before you can use it. Some cards even allow you to receive your paycheck as a direct deposit. Just be sure to check that the card does not have a lot of fees and charges.
- Payment App: Peer-to-peer (P2P) payment apps such as Zelle, Venmo, CashApp, or PayPal can be a viable alternative to a bank account for managing your day-to-day finances.
- Finance Apps: There are several finance apps such as Current or Chime, that offer a free debit card, which enables you to use them as you would a checking account.
- Brokerage Cash Management Account: There are many brokerages, such as Robinhood that offer a cash management account with a debit card. In fact, if you upgrade to Robinhood Pro, you get a number of cash management account perks, which may be more attractive compared to a basic checking account.
Whichever route you choose, just be sure to check what fees and charges will apply to your account, so you can make an informed decision.
Is there any effect on my savings account?
This depends on the reason for closure. If the account was closed due to excessive transfers, your savings account may also be affected. However, in most cases, there should be no impact on your savings account.
How to get a Copy of Your ChexSystems Report?
Under the FCRA, you are entitled to a copy of your ChexSystems report once every 12 months for free.
To request your report, you need to visit the ChexSystems website and follow the online submission instructions. You can also find instructions for mail and phone requests on the site.
How to Check for Identity Theft?
You should check your statements for any unauthorized transactions each month and request a copy of your credit report regularly to check for any activity you have not authorized.
Can a bank close your account without notice?
Yes, banks can close an account without notice, but for certain reasons, you will receive notifications that the bank intends to close your account.
For example, if your account is dormant, you are likely to receive several emails or letters informing you that if you don’t activate your account, it will be closed.