September 24, 2024
Bank Closed My Account with Money: Here's What To Do
For millions, a bank account is a trusted financial safe haven — a secure place to store and access money. But what do you do when that lifeline is abruptly cut off, and you can’t access your money?
Banks close accounts for various reasons, and these institutions don’t always have to let you know. This article gets into what to do if your bank closes your account with money in it. Learn the reasons behind account closures, how to recover your funds, and how to avoid sudden account closures in the future.
What happens if your bank closes your account?
Sometimes, banks close an account without warning, meaning your funds are frozen and you can’t make transactions or withdrawals. If there’s money in the account, your bank must return it to you. That said, if they closed it due to concerns about illegal activity, they may hold the funds until further investigation.
But if your bank closes your account with a negative balance, they’ll likely get in touch to find a way to receive those funds and bring the account back to zero.
Having your account closed by the bank doesn’t directly impact your credit score. But if you have any unpaid balances like overdraft fees associated with the account and you fail to settle them, your account could be referred to a collection agency. In this case, the collection process could negatively affect your credit score.
Why would a bank close your account?
So, can a bank close your account? Unfortunately, yes. But when and why does it happen?
Banks close personal and business accounts for a variety of reasons. While it can be a shock to discover that your account has been closed, understanding the potential causes will help you effectively address the issue and keep it from happening again.
Here are some of the most common reasons a bank might close your account:
- Inactivity. If you haven’t used your account for an extended period (usually several months or years), the bank may consider it dormant and close it. This is because inactive accounts can be costly for banks to maintain and may be more vulnerable to fraud.
- Negative bank account balance. Your account might close if it’s overdrawn for an extended period. This is particularly likely if you’ve failed to respond to the bank’s attempts to contact you or haven’t made arrangements to pay off the negative balance.
- Suspicious or fraudulent activity. Banks must monitor accounts for signs of suspicious or fraudulent activities like money laundering, identity theft, and bounced checks. If they detect unusual transactions or behavior, they may close your account to protect you and the bank from potential losses or legal issues.
- Too many overdrafts. If you frequently overdraw your account, resulting in multiple overdraft fees, the bank may view this as a sign of financial mismanagement and decide to close your account. Repeatedly incurring overdraft fees suggests that you’re struggling to manage your finances, which is a liability for the bank.
What to do when the bank closes your account: 6 steps
If you find yourself in this stressful situation, take action promptly to minimize the impact on your finances and resolve the issue quickly. Here are the key steps to take:
1. Contact your bank
Start by asking your bank why they closed your account. Be prepared to provide identifying information and discuss issues that may have led to the shutdown. If it’s something you can fix, like an overdrawn balance, deal with it as soon as possible or work with the bank to develop a plan to address the problem.
2. Turn off automatic payments
If you have any direct deposits or automatic bill payments set up through the closed account, make alternative arrangements so you don’t miss important transactions.
Contact or log into the online portals for your employer, relevant government agencies, and other organizations from which you receive income to update your direct deposit information. And don’t forget to turn off automatic bill payments or move them to a new payment method.
3. Pay off outstanding balances
If your account was closed due to an overdrawn balance or unpaid fees, settle the debts as soon as possible. Failure to do so could result in your account being referred to a collection agency, which can hurt your credit score. Sometimes, paying off the outstanding balance may also allow you to reopen your account.
4. Dispute incorrect information
If you believe your account was closed due to incorrect information, like suspected fraudulent activity you didn’t engage in, dispute this with your bank. You can also request a copy of your ChexSystems report (a consumer reporting agency that tracks banking activity) to make sure there are no errors or inaccuracies that contributed to the account closure.
If your bank submits incorrect information to ChexSystems related to the account closure, you’ll also need to dispute that information with ChexSystems to avoid running into problems when opening a new bank account.
5. Get your money back
Claiming money from a closed bank account is simple, since banks are legally obligated to return your funds. You shouldn’t run into problems unless your account was closed due to potential suspicious activity, in which case there may be delays.
Contact your bank to arrange for fund release. This could be by check, money order, or transferring the money to another account.
6. Open a new account
If you can’t resolve the situation with your bank, you’ll need to open a new account elsewhere. Research banks and credit unions in your area to find one that meets your needs and has favorable terms and conditions. Be prepared to provide identification and undergo a ChexSystems review.
How to avoid bank account closure
Dealing with a closed bank account is a headache. Here are some steps you can take to reduce the risk:
- Keep your accounts active. Make regular deposits or withdrawals, even if they’re small. This prevents your account from being marked as dormant. Set a reminder to make a transaction at least once every few months to keep your account in good standing.
- Stick to the terms and conditions. Get familiar with and follow your bank’s rules and regulations. This can include things like maintaining a minimum balance and avoiding excessive overdrafts.
- Pay balances promptly. If you incur fees or overdrafts, pay them quickly to prevent your account from being flagged as delinquent. And if you’re struggling to pay, discuss payment plan options with your bank. Being proactive and communicative can help you avoid account closure.
- Sign up for low-balance alerts. Set up alerts to stay informed about your account activity and avoid overdrafts and other issues that could put your account at risk.
- Have a backup. Consider opening and funding an account at another bank as a safety net. Having a backup account ensures you’re not stranded if your primary account is closed without warning.
Stay on top of your financial health with EarnIn
Account closures are disruptive. Empower yourself with a secure and convenient way to access your money as you earn it. Use the Cash Out tool on EarnIn to get up to $150/day and up to $750/pay period — with no credit checks, no interest, and no mandatory fees. AndEarnIn’s Credit Monitoring tool lets you track your credit score and catch issues before they can affect your banking.
Learn more about EarnIn and explore tools that can help you stay on top.
Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.
1. EarnIn is a financial technology company not a bank. Subject to your available earnings, Daily Max and Pay Period Max. EarnIn does not charge interest on Cash Outs. EarnIn does not charge hidden fees for use of its services. Restrictions and/or third party fees may apply. EarnIn services may not be available in all states. For more info visit earnIn.com/TOS
2. EarnIn is a financial technology company, not a bank. Banking Services are provided by Evolve Bank & Trust, Member FDIC.Calculated on the VantageScore 3.0 model. Your VantageScore 3.0 from Experian® indicates your credit risk level and is not used by all lenders, so don’t be surprised if your lender uses a score that’s different from your VantageScore 3.0. Learn more: https://www.experian.com/assets/consumer-information/product-sheets/vantagescore-3.pdf
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