One of the most frustrating experiences is when your bank closes your account. It is important to realize that just as you can choose which bank you do business with, your bank can also choose not to do business with you.
There are laws in place that prevent banks from closing accounts based on things like race, but if you are a poor customer, and your account goes delinquent, then the bank can close your account. Usually, that only happens after your account has been negative for a set number of days, and you should have received notices from the bank about the issues.
What Should I Do if My Bank Has Closed My Account?
As soon as you receive notice that your bank has closed your account, you need to take immediate action in order to be able to continue to pay your bills and manage your money. If you do not, your paycheck may go to the bank, but you will not be able to access the funds. The bank may keep the money to help cover your negative balance, since you still owe that money.
- Stop your direct deposit to your bank from your employer. The bank can hold any money that you currently owe in overdraft fees and charges, but you may need that money to pay your rent and other bills. Contact your human resource department immediately to set up payment by check or to have the money deposited to another bank account if you have one.
- Stop any automatic transfers from your account. This can save you money in overdraft fees, and you may need to suspend services for some things while you try to address your banking situation.
- Speak to your bank to find out exactly why it closed your account, and to learn how much money you owe in overdraft charges and fees. Your bank will report any amount that you owe to ChexSystems. A negative ChexSystems report may stop other banks from opening an account for you. Try to set up a payment plan so that you can pay off the amount that you owe.
- Try to open a new bank account at a different bank. The bank may be willing to work with you, if you can bring in a written statement from your old bank that you have set up a payment plan. Often this will be a savings account instead of a checking account, which means you will not have a debit card or checks to pay your bills.
How Can I Avoid Having My Bank Close My Account?
The best way to avoid having your account closed is to avoid a negative balance. Even if your account offers overdraft services, you will be paying a lot in overdraft fees, and you may become trapped in an overdraft cycle where more and more of your paycheck goes towards the overdraft fees.
Keeping a running balance of your account, and spending only the money that you have in the account will protect you from finding yourself in this situation.
If you have started an overdraft cycle, you will need to break it. You can do that by cutting back on your spending and possibly speaking with your bank about a schedule to pay back the fees so you can still afford groceries and to pay your rent during the week. You may need to consider selling something or taking on extra work in order to recover from being overdrawn. You need to be proactive until you fix the situation.
If you have not already, you should set up a bare-bones budget and start putting all of your extra money into catching up with the bank and other bills. This may mean that you limit spending on luxuries and cancel things like your cable subscription and gym memberships.
Once you are on a tight budget, you should be able to catch up on your bills and begin to plan for future expenses so that you do not overdraw your account.
Living Without a Bank Account
If you have your account closed, it will be difficult to find another bank or credit union that is willing to work with you. You will need to learn to operate without a bank account for a few months. You can use money orders to pay many of your bills, or you may want to try to get by with a prepaid credit card.
It can be embarrassing to talk to your employer about the issues, but you will need to work out a payment method if your job will only pay you by direct deposit. Some banks may be willing to open a savings account with direct deposit for you until you can establish a checking account again.
Frequently Asked Questions (FAQs)
How do I know whether my bank account is closed?
If your account is inactive or has a negative balance, your bank will likely notify you via mail or email before, but a bank can legally close your account without notifying you at all. You should monitor your accounts online to keep track of their status.
Can I get the bank to open my account again?
If you think your account was closed wrongly, you can appeal directly to the bank, or you can file a complaint with the Office of the Comptroller of the Currency's Customer Assistance Group.
Does it hurt my credit score if a bank closes my account?
The major credit bureaus—Experian, Equifax, and TransUnion—do not include data about bank accounts in your credit score. But checking account reporting companies, such as Chex Systems or Early Warning Services, may collect information about any closed accounts. That could make it difficult for you to open a new account.