How can you close a bank account

Closing a bank account can be like breaking up with a partner. It can take more time and hassle than you expect at first. Even when you think you’ve parted ways, the jilted bank may not agree and may reopen your account without notifying you — leaving you vulnerable to mounting fees.

Electronic banking will be the biggest complication as you cut ties with your old account. Automated payments and deposits are convenient, but they will make switching banks harder because you’ll need to reroute these to your new account. If you only want to close your account, you’ll still need to follow the steps below, but rerouting won’t be necessary.

We don’t want your breakup with your bank to end up like the movie “Fatal Attraction,” so we’ve compiled some tips below to help you smoothly transition to your new bank and properly say goodbye to your old one.

Switching Banks: Step By Step 

Closing a checking account requires more planning than closing a savings account, since you’ll need to redirect automated transactions, which you’re less likely to have set up on a savings account. If you’re closing an account with no automated transactions, you can skip directly to Step 4. 

Step 1: Start A Relationship With A New Bank 

If you haven’t yet opened a new account, your first step to closing a bank account is to shop for a new one so you can continue automatic transactions without interruption. If you need a refresher on how to open a checking account, WalletHub provides step-by-step instructions, a list of requirements as well as tips for selecting the account that’s right for you. As you comparison-shop, review each account offer carefully, especially if dissatisfaction is the reason you’re leaving your current bank. 

Step 2: Reroute Auto Payments & Direct Deposits To Your New Account

Review your bank statements from the past 12 months, and list every automatic transaction, including when it’s usually due or deposited and how much. One year of bank statements is necessary, as some transactions are infrequent. For example, if you no longer want your magazine subscription, don’t assume your bank will reject the payment after closing your account. Banks are known to reopen inactive accounts if automatic payments weren’t properly shut off beforehand (more details on that in Step 6) — not to mention the late fees you could incur from the biller.

There are three kinds of transactions you should look for:

• Payments you set up in your bank’s online bill pay system. Rerouting these payments is a two-step process. Once you’ve scheduled these payments in your new account, you’ll need to turn them off in your old account. Otherwise, you risk sending duplicate payments.

• Payments set up elsewhere that automatically withdraw from your account. You may have a car loan or mortgage payment that is processed through ACH. Don’t overlook small payments such as a Netflix subscription, or things like transit passes that automatically reload when they reach a low-balance threshold. For these payments, you’ll simply need to provide the biller the details of your new bank account.

• Deposits such as a direct deposit of your paycheck or Social Security benefits. To change these over to your new account, you may need to complete new paperwork and/or provide a voided check.

Some billers require extensive advanced notice (e.g., 30 days) to process your new payment information. You’ll want to keep your current account open with enough funds until the last transactions have cleared.

Step 3: Put Your Old Account Into Hibernation

To avoid unpleasant surprises, stop using your old account, keep it open for a month or two and leave some cushion money (e.g., $200) — if you can afford to do so —to cover unexpected auto transactions that weren’t properly deactivated by you, your bank or the biller. Also leave enough to satisfy minimum balance requirements so you don’t pay a monthly account maintenance fee. 

Step 4: Close Your Account Permanently

Once you’re confident that all electronic transactions have stopped, it’s time to sever ties for good. Let your bank know you want to close your account, as simply reducing your account balance to zero will not shut it down automatically.

Unless your bank is online-only, in which case in-person account closure won’t be an option, you’ll be able to terminate an account in several ways, depending on whether it has funds and whether it’s in good standing:

• If there are no funds in your account and you do not owe fees to your bank, you may be able to close your account online (often by sending a message to your bank through its online banking system) whether you bank with a traditional or online-only institution. You can also call customer service or mail in a form letter.

• If there are funds in your account, your bank will subtract any applicable fees and ask you to collect the remaining funds through the same channels above or strictly in person, depending on your bank. You can request the refund in the form of a cashier’s check or an ACH transfer, which takes about one to two business days to process (wire transfers are usually faster, but you’ll pay significantly more — see our review of the potential costs below). Keep in mind that you may need to wait longer for your refund if your account has a large balance.

• If your account has a negative balance, you will not be able to close it until you bring your account back to positive and pay the resulting fees. And if you don’t pay these back within a reasonable time (e.g., 30 days), your bank can close your account “for cause” — in this case, for failing to pay outstanding fees and leaving a balance in the red too long. It could also send the account to a collection agency, which will hurt your credit score.

Step 5: Get Confirmation In Writing

Ask your bank for a written letter that documents all the details of your account closure. Keeping a paper trail will help you in your financial life ­— and your cause if you need to use the letter in a future dispute.

Step 6: Review Your Final Bank Statement

With sensitive personal and financial information more vulnerable to identity theft nowadays, you should carefully review your last bank statement to make certain that no unauthorized transactions were made prior to shutting down your old account. Otherwise, contact your bank immediately if you don’t recognize a transaction posted on your statement.

Also look out for future correspondence from your old bank, especially within the first 45 days of closing your account. Many banks will automatically resurrect a dead account if you didn’t properly deactivate an automated payment or if a biller failed to honor an automatic payment termination. When this happens, the account becomes what is commonly known as a “zombie account.” In such a case, having the confirmation letter from Step 5 could be helpful.

Potential Costs When Closing A Savings Account

With careful planning, it’s possible to avoid any fees when switching over to a new bank. But if you’re shutting down a relatively new account, there may be a fee associated with closing it. And if your bank reopens your inactive account because of stubborn automatic transactions you tried or forgot to deactivate, you could be on the hook for a longer list of fees.

It’s important to understand that — unlike closing a credit card or line of credit, which could hurt your credit score — closing your bank account is not a factor in your credit score.

Tips For A Seamless Transition

Breaking up with your bank doesn’t have to be a painful experience. To help ease the process, follow the tips below.

• Ask About A “Switch Kit”: If you’re daunted by the process of closing a bank account, you may benefit from a “switch kit” if your bank offers one. Such kits include form letters that instruct your depositors and billers to update their records or request that your bank close your current account. They’re often available online, by mail or directly from a bank branch.

• Bring Everyone & Everything With You: Some banks require the presence of both owners of a joint account when closing it, so make sure you’re both available that day. Each account owner may also be required to bring ID as well as his or her Social Security number for account verification purposes.

• Call Ahead: If you’re planning to close your account in person, ask your bank for their hours and whether a staff member can assist you with your request. Some banks designate a specific time window and department to handle account closures. If you’re not there at the right time or speaking with the right person, the process could be delayed.

• Don’t Expect What You’re Expecting: If you have an interest-bearing account, some banks may decide not to pay the interest that accrued on your account that month upon closure.

• Update Your Contact Info: Make sure to provide your present mailing address and phone number to your old bank. If it ends up owing you money after closing your account, you’ll want your refund to go to the right place. And if it reopens your account because of auto payments that you turned off but went through, you’ll want to know before incurring heavy fees and being reported to ChexSystems.

• Don’t Skip Closing Your Account: Some people leave their bank account open to avoid the hassle of shutting it down, but there’s a cost to ignoring this step. Besides the fees described earlier, your bank could charge you a “dormant account” fee if your account becomes inactive for a certain length of time (e.g., one year). Some will levy this charge every month until you finally close or reuse your account. So it’s best to terminate your account if you no longer need it and have already migrated automatic transactions to your new bank.

Image: kuvona / Shutterstock

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