What Happens When You Close a Checking Account?
Navigate the complete process of closing a checking account, from essential preparations to understanding post-closure considerations and common issues.
Closing a checking account requires careful planning to ensure a smooth transition and prevent financial complications, such as missed payments or unexpected fees. People often close accounts to switch banks, relocate, or consolidate finances.
Preparing Your Account for Closure
Before closing a checking account, transfer most funds out. Consider leaving a small balance ($5-$20) to cover any lingering transactions or unexpected fees, which helps avoid potential overdrafts.
Update all direct deposits, including paychecks, government benefits, and tax refunds, to your new account. Employers often require new forms, and changes can take one to two pay cycles. Government agencies may also have specific procedures, often requiring several weeks.
Update all automatic payments and withdrawals linked to the account, including bill payments for utilities, loans, credit cards, and recurring subscriptions. Review recent bank statements or online portals to identify all recurring debits. Failure to update these can lead to missed bills, late fees, or service interruptions.
Confirm all pending transactions have cleared, allowing 3 to 5 business days for checks to cash and debit purchases to post. Closing an account with pending transactions can result in overdrafts. Save digital or physical copies of bank statements and transaction history for 12 to 24 months for tax purposes or future reference.
Steps to Close Your Account
After preparation, formally close your checking account. Contact your bank by visiting a branch, calling customer service, or using online banking. Some banks accept written requests, occasionally requiring notarization.
When closing, the bank will require information to verify your identity and ownership, such as your account number, routing number, and a government-issued ID. Confirm with the representative that the account balance is zero or that remaining funds are transferred or issued as a check.
After closure, request written confirmation from the bank, including the closure date and confirmation that the account is settled. This document serves as an important record. Destroy any unused checks, debit cards, or ATM cards, typically by shredding, to prevent unauthorized use.
After Your Account is Closed
After closing your checking account, verify the closure and monitor for lingering activity. Confirm the account’s status by attempting to log into online banking or by checking for final statements or notices. This ensures the closure was processed.
Continue monitoring your new bank account statements and credit reports for 30 to 60 days. This helps catch any direct deposits or automatic withdrawals that might inadvertently attempt to process on the closed account, allowing prompt rectification of missed transfers.
Closing a checking account generally does not directly impact your credit score. Checking accounts are not credit products and are not typically reported to the three major credit reporting companies—Equifax, Experian, and TransUnion—unless the account was closed with a negative balance that went to collections. Maintaining a good standing with your bank is important to avoid indirect negative impacts on your credit. Keeping the written confirmation of closure and any final account statements with your financial records is a recommended practice for future reference.
Troubleshooting Common Issues
Even with careful preparation, issues can arise when closing a checking account. One common problem is an overdraft occurring after the account is supposedly closed, which can happen if a pending transaction posts unexpectedly. Banks may charge overdraft fees, typically ranging from $25 to $35 per transaction, and may also impose continuous overdraft fees if the balance remains negative. Promptly contacting the bank to resolve the negative balance and any associated fees is essential.
Forgotten automatic payments or direct deposits can also lead to complications. If a payment attempts to process on a closed account, it will likely bounce, potentially incurring fees from both your former bank and the payee. Similarly, direct deposits will be returned to the sender. Rectifying this involves immediately contacting the relevant party—such as your employer or a biller—to update your banking information and arrange for the payment or deposit to be rerouted.
In cases of unresolved disputes or suspected fraudulent activity that emerge after closure, it is still necessary to contact your former bank’s fraud department. The bank retains responsibility for investigating issues that occurred while the account was active. If you encounter difficulty in closing the account due to bank resistance or complex requirements, escalating the matter to a branch manager or a supervisor can be effective. If issues persist, a formal complaint to a consumer protection agency might be necessary.
Reopening a previously closed account is generally not possible, especially if the closure was due to unpaid fees or bank-initiated reasons. While voluntarily closed accounts might sometimes be reactivated, a new account application is usually required, which may involve new terms and a review of your banking history.