How to Close a Bank Account: Everything You Need to Know

How to Close a Bank Account: Everything You Need to Know
Point Editorial

Why do you want to close your bank account? Maybe you’re moving to a different state or country or have found another bank that offers better features, lower monthly fees, or higher interest rates. Perhaps you’ve outgrown your student banking account. Some major life events — like a divorce or death in the family — might also lead you to have to close an account.

Whatever your reasons, there are a few steps you should always follow to make sure your banking breakup goes as smoothly as possible.

Going separate ways

You’ll want your new bank account to have low transaction fees (or none at all), easy access to your funds, and competitive interest rates. No bank account is perfect for everyone, so brainstorm the most important features to you. You might want to consider switching banks, too. These features depend on how you plan to use the account.

Before jumping to a new account, consider developing a clear set of money-saving goals and strategies. That way, you’ll be making the most informed decision possible about the future of your banking relationship.

Do this first, because you’ll need somewhere to transfer the remaining funds from your old account.

A step-by-step guide to close a bank account

Follow these steps to make sure you avoid common pitfalls when you close your account. It’s crucial to take things one step at a time to avoid making costly mistakes that could land you in hot financial water.

Step one: open your new bank account

Once you have a clear financial strategy and you’ve made a decision about where you want to take your business, it’s time to get all your documents in order and apply for a new bank account online, by phone, or in person. 

Step two: transfer money

When you open your new account, you’ll likely be asked to deposit some funds. You can do this by transferring money from your old account or by depositing a check or cash in person at the bank.

Step three: update your direct deposits and automatic transactions

If you have direct deposits or automatic payments set up for your old account, now is the time to transfer them to your new account. These might include direct deposits from your employer, automatic bill payments, subscriptions, or installment payments. 

Go through your transaction history and identify any direct deposits or recurring payments like your hydro bill or gym membership. You’ll have to contact the relevant party and update your banking information for each. This can take from a few weeks to a month or more, so be patient.

In some cases, you’ll have to confirm that the payment has been canceled in your old account to avoid making double payments. You might also have to complete some paperwork or send a void check to your employer, so don’t forget to follow up.

Step four: put the old account into hibernation

Even after you’ve transferred all your automatic banking to your new account, you should still keep the old account active for a few months with a small amount in it (a few hundred dollars, if possible) in case a surprise payment goes through. 

This helps prevent overdraft fees or unpaid bills, both of which will negatively affect your credit score. Make sure all withdrawals have gone through and you’ve made the necessary adjustments before moving on to the next step.

Step five: transfer your balance and permanently close your account 

After any outstanding transactions have cleared, you can transfer your remaining balance into your new account. Only do this when you’re ready to close your account because you might be charged for letting your account drop below the minimum balance permitted.

Once you’ve emptied the account, you can now ask to close it permanently. Depending on your financial institution, you might be able to close your account online. Otherwise, you might have to call customer service, mail in a form letter, or visit your old bank.

Step six: get written confirmation

Ask your bank for a written confirmation of your account closure, and keep a copy of your final account statement. You should also check the bank’s policy for reopening accounts. Banks can reopen your account if an automatic payment goes through, even if it results in a negative balance, so beware.

Step seven: destroy any extra checks and debit cards

Collect all leftover checks and cards associated with the old account and destroy them to prevent you from using them accidentally or having someone else use them fraudulently. Cut the card with scissors and shred leftover checks, bank statements, or anything containing your account information.

Tips and reminders

These are the main things to remember when closing your account:

  • Be sure to open a new account before closing the old one.
  • Cancel or transfer any automatic payments or direct deposits associated with your old bank account.
  • Leave some funds in the old account until all payments have cleared.
  • Keep detailed records of everything you do. 

How to close certain types of bank accounts

You may need to take extra steps to close an account. The examples below cover some of the most common types of accounts that require special procedures to close.

Inactive account

If you haven’t used an account for an extended period, the bank may have registered it as inactive. In some cases, you’ll have to go to the branch location in person to reactivate the account to close it.

Overdrawn account 

If your account is overdrawn, you likely can’t close it until you bring your balance back up to zero. If you leave a negative balance for too long, the bank may close the account automatically and send the debt to a collections agency. This could show up on your credit report.

Child’s account

If you want to close an account that was opened for you by your parents, you will have to go to the bank with the parent who co-owns the account and both of you will have to sign an account closure form.

Joint account 

If you want to close a joint bank account held with your spouse (or ex-spouse), you’ll need to get written consent from the other account holder or go with them to the bank’s branch location.

If you can’t locate them or get their consent, you might have to take the matter to court.

Deceased person’s account

Unless you are a listed beneficiary of the account or are named in the deceased’s last will, you’ll likely have to seek legal counsel before taking any action concerning the account.

FAQs on closing bank accounts 

Does closing a bank account affect my credit score?

No. Closing a bank account doesn’t affect your credit. If you forget to transfer all of your automatic payments to your new account or leave your old account with a negative balance you might be considered delinquent on your debts and see your credit score take a hit. Opening accounts, especially new checking accounts, doesn’t usually impact your credit score either.

How much does it cost to close a bank account?

Most banks let you close your account for free. The bank could charge a closure fee if the account has only been active for a short period or if your account is overdrawn at the time of closing.

How long do banks keep records of old accounts?

The law requires banks to keep records of old checking and savings accounts for at least five years.

Taking care of your new bank account

Whatever your reason for closing your previous account, you should remember to manage your new account carefully. If you haven’t already, establish a clear set of budgeting and personal finance strategies for yourself.

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