Should I Close Unused Bank Accounts?
Maximize your financial clarity. Understand the impact of dormant bank accounts and gain practical steps to manage them effectively.
Bank accounts are a fundamental part of managing personal finances. Many individuals maintain multiple accounts, some of which may become less utilized or entirely dormant. Understanding the considerations surrounding these unused accounts is important for effective financial management. This guide explores aspects of maintaining or closing such accounts.
Implications of Unused Accounts
Leaving a bank account open but unused can carry several consequences. One significant concern is the potential for fees. Many financial institutions impose monthly maintenance or inactivity fees on accounts that fall below a certain balance or have no customer activity for an extended period, often ranging from $5 to $20 per month. These charges can deplete any remaining balance, potentially leading to a negative balance.
Beyond fees, unused accounts can enter a “dormant” status, which eventually leads to escheatment. An account typically becomes inactive after six to twelve months without activity, and then dormant after a longer period, often between one to five years, depending on state regulations. Once an account is declared dormant, funds are legally transferred to the state as unclaimed property. While these funds can often be reclaimed, the process can be time-consuming and complex.
Unused accounts also present security risks. If information for a dormant account is compromised, it could become a target for fraud, even with a low balance. Tracking multiple accounts, especially those rarely used, adds an unnecessary administrative burden to financial oversight.
Preparing for Account Closure
Before formally closing a bank account, several preparatory steps are necessary. First, transfer any remaining funds out of the account. This can typically be done via electronic transfer, cash withdrawal, or by requesting a cashier’s check. Confirm the account balance is zero or near zero before proceeding with the closure request.
Next, identify and update all services linked to the account. This includes direct deposits, such as paychecks or government benefits, and automatic bill payments for utilities or subscriptions. Reviewing past bank statements for at least 12 months can help identify all recurring transactions. Update payment applications and online retailers that store bank account information with new payment details.
Finally, check for any outstanding checks or pending transactions. Any checks written that have not yet cleared must be accounted for. Allow any scheduled payments to process or re-establish them with a different account. This diligence prevents unexpected overdrafts or issues after the account is closed.
Steps to Close an Account
Once all preparatory steps are complete, the formal process of closing a bank account can begin. Banks offer several methods for account closure, including visiting a local branch, contacting customer service by phone, or submitting a request online or by mail. In-person visits can often expedite the process and provide immediate confirmation. When initiating the closure, the bank will require specific information, such as the account number and personal identification, to verify identity.
Request written confirmation of the account closure. This documentation, such as an email or formal letter, serves as proof that the account has been officially closed and can be helpful for record-keeping. After the closure request is submitted, customers should expect a final statement that reflects all transactions up to the closure date, confirming a zero balance. Destroy any associated debit cards and unused checks once the closure is confirmed.