Content provided by Bankrate.com. New York Post and its content partners earn compensation from the affiliate companies that appear below. This content does not include all available financial offers, and compensation may impact how and where links appear in the content.
You’re going about your day, paying bills, buying groceries, living your life — when suddenly, you realize your debit card isn’t working. You call your bank, only to discover they’ve closed your account without warning. Cue the panic.
Banks close accounts more often than you might think, and it’s not always because you’ve done something wrong. There are a bunch of reasons why your account may have gotten closed.
Here are the common reasons why banks close accounts, what to do if your account gets closed, and how to avoid it.
Why do banks close accounts?
Banks can close accounts for various reasons — some that are in your control and some that aren’t.
“The frustration is that if your bank closes your account, they may not tell you why,” says Jay Zigmont, certified financial planner and founder of Childfree Wealth. “[But] when I’ve worked with people who had an account closed, seemingly randomly, there’s usually a trigger somewhere nearby.”
Here are a few common scenarios that can lead to account closure:
- Inactivity: If you’ve let your account gather cobwebs for a year or more, your bank might decide to close it. They don’t want to keep maintaining an account that’s not being used.
- Suspicious activity: Banks have to keep an eye out for shady stuff like money laundering or fraud. They might close your account to protect themselves and other customers if they notice any weird transactions.
- Too many overdrafts: If you’re constantly overdrawing your account and not returning it to a positive balance, your bank might close it.
- Violating the bank’s terms: When you open an account, you agree to play by the bank’s rules. If you break them by bouncing checks or doing other things you’re not supposed to do, they can give you the boot.
- Bank policy changes: Sometimes, banks switch things up and discontinue certain types of accounts. If yours doesn’t fit their new model, they might close it.
What happens when a bank closes your account?
So, your account’s been closed. Now what?
Banks typically don’t just turn off your account access without notifying you. They’ll often start the process with a notification of account closure. You may get this notice a few days (or even a few weeks) before your account is officially closed.
Then, the bank will freeze your account, preventing you from depositing funds. You’ll also lose the ability to make purchases or take cash out of an ATM using your debit card.
If you had any money in your account when it was closed, your bank will usually send you a check for the remaining balance. But heads up – if you owe them any fees or debts, they’ll subtract that first. If your account is being closed because of suspected fraud or other suspicious activity, the bank may withhold the money.
If you had any automatic payments or recurring transactions set up with the closed account, they’re going to bounce. This can lead to late fees and dings on your credit score, so be careful.
What to do when the bank closes your account
The first thing to do is check your credit report for any signs of identity theft or fraud. If someone stole your identity, their activities may cause the bank to believe you were committing fraud, leading to the account closure.
If you don’t see any signs of identity theft, call your bank and find out why they closed your account. If it was just a misunderstanding or a mistake, you might be able to sort it out and reopen the account.
You may also want to inquire about second-chance accounts or other options. Some banks offer accounts for those with previous bank account issues, such as frequent overdrafts. If the bank doesn’t reopen your account, you should cancel any direct deposits to the account.
You should also unlink the account from other financial institutions, including credit card companies and lenders. Make sure to update any automatic payments with your new account information so you don’t miss any bills or lose out on any money.
How to open a new bank account
If your bank won’t reopen your account, it’s time to take your business elsewhere. You’ll need to find a new financial institution to bank with.
Research banks with the features you need, like low fees, online banking, or a good mobile app. Consider an online bank, which often offers accounts with lower minimum balance requirements and fees.
Many banks won’t let someone with previous negative bank activity, like frequent overdrafts, open a new account. If your account was closed for that reason, you should look into specialized second-chance banking. These accounts come with basic features and a monthly fee, designed for those who have had previous problems with bank accounts.
To open any bank account, you’ll usually need a government-issued ID, proof of address, and your Social Security or taxpayer ID number. Some banks might also ask for an initial deposit.
How to prevent your bank from closing your account
While you can’t always stop an account closure, there are some things you can do to lower the chances of it happening:
- Keep your account active by using it regularly, even if it’s just for small transactions.
- Avoid going into overdraft by keeping an eye on your balance. If you do go over, try to bring your balance up as soon as possible.
- Follow your bank’s terms and conditions. Don’t do anything that could raise red flags, like money laundering or wire fraud.
- If you know you’ll have money issues coming up, let your bank know. They may be able to work with you to find a solution before closing your account.
“In some cases, you may be able to ‘warn’ your bank if you know you are going to do something that raises flags,” Zigmont says. “For example, if you know you’re regularly going to be wiring money internationally. Banks are trying to protect themselves first and foremost, so if they know what is going on, they may be willing to work with you.”
When to get additional help
A sudden bank account closure can be a major headache, so it’s best to avoid it and ask for help when needed. If you’re having trouble dealing with it, some resources can lend a hand.
- Consumer Financial Protection Bureau (CFPB): The CFPB is a government agency that looks out for consumers in the financial world. If you believe your bank treated you unfairly, you can consider filing a complaint with the CFPB.
- Legal aid: If you think your account was closed unjustly or you’re facing legal troubles because of the closure, consider reaching out to a legal aid organization. They offer free or low-cost legal help to people who qualify.
- Financial advisor: If you’re struggling to manage your money or need help rebuilding your credit after an account closure, think about working with a financial advisor. They can give you personalized advice and help you make a plan to reach your financial goals.
The bottom line
Having your bank close your account can be a real pain, but it’s not the end of the world. By understanding why it happens, what to expect, and what steps to take, you can minimize the damage to your finances and keep moving forward.
Stay on top of things, talk to your bank, and don’t be afraid to ask for help when needed. With a little bit of effort, you can bounce back from this setback in no time.
Opinions expressed are author’s alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.