It can be one of the most stressful situations in your life: You receive a notice informing you that your bank account has been closed with no prior warning.
Having your bank account suddenly closed can cause a mountain of issues that often take weeks to resolve. Here’s what you should know about having your account closed—and the steps to take to rectify the situation.
Why the bank might’ve closed your account
Suspicious activity is one of the most common reasons a bank might close your account. This can include someone trying to impersonate you and steal your identity. In this instance, the bank might preemptively close your account to prevent money from being stolen.
The bank may also close your account if they think you are conducting illegal activity, such as laundering money or engaging in wire fraud. If you deposit fraudulent checks, the bank may close your account, even if you did not know they were fake. Frequently overdrawing your account can also lead to closure.
“If you tend to bounce checks, they’ll get rid of you pretty quick,” said Jamie Lima, CFP of Woodson Wealth Management.
The bank may also close your account if you use a personal checking account for business purposes, as this may be in direct violation of their terms and conditions. Ally Bank, for example, states that personal accounts cannot be used for inventory purchases, payroll expenses or business transactions—and warns that it reserves the right to close your account if it believes you’re conducting business from your personal account.
Another common explanation is more mundane. Most banks require that you deposit funds either at opening or soon thereafter, and give 30-60 days for the deposit to be completed. If you don’t adhere to the time frame, the bank is likely to close the account.
Inactivity is another common reason for closing an account. Some banks close accounts that have been inactive for three-to-five years.
Steps to take after the bank closed your account
If the bank has closed your account, you should contact it directly to figure out why. The bank may be willing to reopen the account if you meet certain criteria.
“Depending on the reason, the bank may be able to work with you to resolve the issue and reopen your account,” said George Jameson, CFP of Blackbridge Financial.
If you have incoming deposits to the account, see if you can redirect them to a different bank account. For example, if you have direct deposit from your employer set up, you can contact the payroll department to change the routing information to a new bank account. You can also ask to switch to paper checks until the matter has been resolved.
If a bank has closed your account and you know there was money in it, you should contact it immediately to access your funds. You will need to provide your account number and any recent statements showing the bank had a balance when it was closed.
What if it wasn’t your fault?
If you believe an account was unfairly closed and the bank refuses to reopen it, you can report the incident to a regulator.
Find out which agency regulates your bank by searching here and filing a complaint. Most account holders can also file a complaint with the Office of the Comptroller of the Currency, but double check to be sure this is your bank’s regulator.
How to avoid the bank closing your account
Some banks will close accounts immediately if you deposit a check that they believe is fraudulent. If you have a large or unusual check, always try to deposit it in person. Large checks can raise red flags, especially if you don’t have a history of depositing those kinds of checks.
Lima said that new account holders need to be more careful than those who have had accounts open for several years.
“I think there’s something to be said for the age of the account and the age of the relationship and the leniency that a consumer will receive from that company,” he said.
Opening a new bank account
If your account has been closed, you can try to open a new one with a different bank. However, you may run into a problem if the previous bank reported anything negative on your ChexSystems report.
A ChexSystems report is like a credit report for your banking activity. When you apply for a bank account, the bank may view your ChexSystems report. If you have negative items on your ChexSystems report, the bank may reject your application.
If you are rejected by a bank, you can try to open an account with a local bank or credit union, which may be more willing than a major national bank to accept you as a new customer.
How to maintain your new bank account
After opening a new bank account, monitor its activity regularly to avoid any potential problems and risk another closure.
Some banks will let you set up email or text alerts so you can be notified when your balance dips below a certain amount. This can help you avoid overdraft or insufficient funds fees.
Make sure to read through the terms and conditions and deposit agreement to understand what the requirements are to keep the account active and in good standing. You can find this in the documents section of your online account. If you opened the bank account in person, you likely received a paper copy of your deposit agreement.
Can you return to the same bank that closed your account?
Depending on internal policy, some banks may not accept you as a customer if they previously closed one of your accounts. You can contact the customer service department and ask if you will be eligible to open an account.
Frequently asked questions (FAQs)
A bank may close your account for several different reasons, but the main two culprits are usually fraud and inactivity.
In extremely rare cases, the bank may fail and close permanently.
If your bank failed and you did not receive your funds at that time, you can visit the official database to see if there are any unclaimed funds. You can go here if you had an account at a credit union that failed.
You may find out that the bank closed your account with an official letter. You may also discover the closure when you try to log in, and there is a message saying the account has been closed.
Banks are legally allowed to close an account without providing advance notice.
To reopen the account, you will likely have to speak to a customer service representative, either on the phone or in person. If they cannot help you, you can ask to speak to a manager.
In some cases, you will not be allowed to reopen the same account. However, the bank may allow you to open a brand new account.
