You may not think much about the relationship you have with your bank. That is, until one day they decide to break up with you. The worst part? You might not even realize anything is wrong until you reach out to swipe your debit card — and it’s declined.
The thing is, banks are perfectly within their rights to close down accounts that aren’t a good fit for them. Often, as inconvenient as it may be, they aren’t even required to notify you of the closure.
So why would your bank want to end your relationship? And how should you respond if they do?
Why your bank might close your account
There are many different reasons your bank might close your account, ranging from the more innocent to the downright criminal.
If you have a bank account that you just don’t use, the bank might wonder why they’re going through all the trouble of maintaining it. After all, not even banking can be a one-sided relationship.
If you don’t have any money in the account, never make a deposit, and never make a withdrawal, the bank is essentially paying to “keep the lights on.” For their sake, it’s better to close down the account and give someone else a chance to be an active customer.
You’re considered high risk
Your bank might be wary of dealing with you based solely on what they know, or don’t know, about you. This is because banks are in the business of reducing risk, and you might look like a risky bet.
For example, if you are employed in a “high-risk” industry (like cryptocurrency or cannabis), a bank might not want to gamble on you.
A bank may consider you high risk if:
- You have a disconnected phone number and the bank is unable to reach you.
- Your address is incorrect and you haven’t updated it.
- You have a criminal record.
- You’ve had unsatisfactory relationships with banks in the past.
If you start engaging in suspicious activity with your bank account, that’s really going to raise a red flag for your bank. Things that are sure to raise concern include:
- Frequent high-dollar deposits and withdrawals
- Deposits that don’t match your supposed job (such as a teacher making multiple big-figure cash deposits)
- Frequent chargebacks
- Multiple money order deposits
- Buying a lot of Visa gift cards
Banks are on high alert for any activity that might signal you’re up to no good. Dealing in drugs, fraud, or other illegal behaviors is an absolute showstopper for your relationship with your bank.
If your account has been closed, it may have been frozen as the result of a court order. In that case, the bank is complying with a judge’s request to freeze your account and they will allow a creditor to be repaid from your funds. This process is called a bank levy, and it only happens when a creditor wins a judgment against you in court and receives a court order to levy your account. So, you should definitely be informed that it will happen before your account is officially inaccessible.
If you owe mortgage payments, back taxes, child support, or similar debts, you might eventually be subject to a bank levy. To avoid this, make sure that you always pay your debts.
Banks are looking for good customers. If you exhibit a lot of bad behavior, you might put your account at risk of being closed.
Some of the actions that could annoy your bank into cutting ties with you include:
- Frequent overdrafts
- Making too many withdrawals from a savings account
- Bouncing checks
A note about savings accounts: It might seem confusing that a bank would close your account for, you know, using it. However, federal regulations limit withdrawals (particularly electronic withdrawals) to six or fewer per month, with the reasoning that if you make more withdrawals your account might as well be a checking account.
If you commit crimes with your bank account — fraud, theft, and so on — the bank clearly has no choice but to close your account. Banks won’t permit a risk that they themselves could be held liable for. In fact, if the banks don’t close down risky accounts, they could face penalties from the federal government, which is always working hard to clamp down on these sorts of crimes.
A few criminal activities that are sure to get your account closed swiftly include:
- Stealing checks
- Passing bad checks
- Committing fraud
- Money laundering
- Receiving or holding money for criminals
Having a bank account is not a right, and if you lose yours due to criminal activity, there’s a pretty slim chance that you’ll get another one.
Just because they want to
Banks are not required to give an account to anyone that they don’t want to and they can close accounts whenever they feel that it is necessary. They’re a business and they have every right to decide to no longer do business with you.
How to prevent having your account closed
When your bank closes your account, it’s incredibly inconvenient. Your money could be locked up for days, or weeks, while things get sorted out. And that’ll have an effect on, well, basically everything else in your life.
So, here’s what you can do to prevent losing access to your funds.
Stay in contact with your bank. If they send you notifications, be sure to read them, and act upon them when necessary. Contact your bank if you’re having problems financially and be proactive, rather than reactive.
Update your personal information
Part of communicating with your bank is keeping them updated with your personal information. If you get a new address, phone number, name, or even employer, update your account information. You’ll help avoid problems down the line if your stated information doesn’t line up with real life.
Use the account
To avoid having your bank account closed for inactivity, make sure you use it every once in a while. If it’s not your primary account, or you just don’t have a lot going on financially, you might need to set reminders for yourself to make a deposit or a withdrawal so the account doesn’t go dormant.
Overdrafting your account should be a rare occurrence, not a common one.
Monitor your balance so you don’t spend more than you have, and consider paying with cash so you can’t overdraw.
To avoid having your balance go negative, link your checking account with a savings or other account that it can draw from instead of using your bank’s overdraft protection.
It can also help to build a buffer of cash in your account so that you aren’t spending down to zero, with no margin for error. The amount of “buffer” you want in there depends on your comfort level. It could be $50, $100, or an entire mortgage or rent payment’s worth (or more). You may miss out on accruing interest you would otherwise generate if that money were held in a savings account, but the peace of mind can be more than worth it!
Pay your fees
If you’re charged an overdraft fee, or any other kind of fee, paying it promptly will go a long way toward keeping your account open.
However, if fees are really eating into your account, you might consider switching banks altogether. You can find bank accounts with no monthly fee and low fees for other activities. That could keep you from getting overwhelmed with fee after fee and possibly being overdrawn.
Track your balance
You’ll be able to avoid a lot of problems if you keep track of your bank account balance. When you know how much you have available, as well as pending transactions and transactions that haven’t posted or cleared yet, you’ll be less likely to spend money you don’t actually have.
There are several ways to do this:
- Use your bank’s mobile app.
- Use a budgeting app.
- Check your balance online, at a bank branch, or at an ATM once per week.
- Update your check register when you spend.
It’s important to know not only how much is in your account at any time, but also what charges or expenses are coming that haven’t hit yet. If you have $400 in your account, but you just sent a rent check for $1,200, you don’t actually have $400 — you have -$800.
Keep a second account somewhere else
Whether it’s an online savings account or a second checking account, you may find it helpful to open a second account at a different institution.
That way, if your primary account is closed, you still have access to funds and banking tasks, so you can still pay bills and get to your money — or at least some of it.
What to do if your account is closed
If your bank account is still closed down despite your precautions, it’s time to take action. If the account was simply closed for inactivity, this will be a pretty easy fix. But if the account was closed for other reasons, like multiple bounced checks, you might have to do a bit more work in order to get your account back open.
Contact the bank
The first step is to contact the bank and find out why your account was closed. Your bank isn’t required to tell you, but they might, especially if the reason is simple. Ask them what steps you can take to get back in good standing and continue your banking relationship.
Next, make sure that they have your up-to-date contact information. If they don’t reopen your account, they’ll send you a check for the remaining balance of the account, and you will definitely want to be able to receive that money.
If your bank account was closed due to confirmed fraud that you were not responsible for, you may be able to ask for another account to be opened at that bank. That said, if your account was closed due to fraud you are responsible for, your bank will file a Suspicious Activity report. After that, you won’t be able to open an account there or, really, anywhere else.
Stop any direct deposits
If you get paid via direct deposit, contact your employer’s HR department so you can switch to getting paid by check. Alternatively, have them put your pay on a prepaid card, which can usually be set up using a new direct deposit worksheet from your employer. Don’t wait to do this, because it could delay when you get paid.
This step is especially important! If the rest of your money is locked up in a closed account and you haven’t received it yet, you’ll want to streamline your ability to accept new funds.
Cancel any autopay bills
If you have any bills that are automatically paid via your closed account, make sure you cancel the automatic payment. Otherwise, your payments won’t go through, and you might owe late fees or missed payment fees, too.
If you open a new account or have a secondary account that you can use for bill paying, switch your payments so that they come from that account.
Settle up with the bank
If your account was closed because you’ve overdrawn too much or incurred too many unpaid fees, find out what you owe to the bank and pay it off, or work out a payment plan.
If your account was closed or frozen because of a judgment, court order, or bank levy, you may need to get a lawyer involved. Otherwise, you can pay off the debt, or try to settle the debt for less than you owe. You may be able to set up regular ACH payments from your account to satisfy the debt.
Under what circumstances can a bank account be closed?
A bank account might be closed because of inactivity, suspicious activity, a bank levy, repeated violations of the account’s rules, criminal behavior, or the accountholder’s unresponsiveness to the bank’s attempts at contact.
How do I know if my bank account is closed?
The only surefire way to confirm if your bank account has been closed is to contact your bank. Be ready to provide the bank with identifying information, like your name, Social Security number, PIN, or the answer(s) to your account’s security question(s).
My bank closed my account for suspicious activity. How do I reopen it?
If you still have access to the account’s history, start by reviewing your account transactions to determine what activity may have led to the account’s closure (e.g., frequent high deposits or withdrawals). Prepare a viable explanation for that activity, then contact the bank and explain the situation to them.
Ask the bank’s representative if there are any steps you can take to remedy the issue and reopen the account. If the first rep you speak with indicates the account cannot be reopened, ask to speak with the representative’s manager before you give up entirely.
Having your account closed by the bank can be inconvenient, annoying, and sometimes a little scary. If you know why your bank can close your account, you can take steps to avoid it. But if it does happen to you, knowing what to do afterward can give you peace of mind as well as a plan of action.