Close a Bank Account

Most banks allow customers to open and close accounts regularly; however, there may be hidden procedures in the fine print of your contract. One challenge with closing bank accounts is that so many deposit and withdrawal services are automated. Another concern is the potential for hidden fees or additional hassle. You must prepare your bank account carefully in order to close it successfully and avoid potential disruptions to your finances.

Steps

Preparing to Close a Bank Account

1. Determine the kind of banking experience you want. Most traditional banks have both online services and physical locations. Some new financial institutions, however, offer only online banking options. Take the time to review the available resources and offerings at various banks.
   • Banks with “brick and mortar” branches can be more comfortable if you prefer to work with a live person and to have a physical location to deposit and withdraw your money.
   • Online banking can be efficient, especially if you are experienced with online banking and are used to paperless finances.
   • Consider non-traditional options, such as credit unions, money market mutual funds, and cash management accounts.
2. Evaluate your financial habits and cash needs. Paying close attention to the bank’s transfer fees, interest rates, your own typical expenditures will help you decide which financial institution makes the most sense for your money management style.
   • Consider the different types of accounts you need and whether the bank offers incentives, such as linking checking and savings.
   • Check the fees and locations for the bank’s ATMs to make sure you can access cash as you need it.
   • Most banks require new customers to make a deposit of a particular amount, so make sure you have enough cash on hand.
3. Open a bank account with your new financial institution.Some banks even offer financial incentives for opening accounts, such as cash bonuses. Direct payments, direct deposits and bill payments should be fully functioning at another location to avoid extra debts.
   • Keep a record of the bank account and routing number of your primary account at your new bank.
   • Set up online banking with your new bank, if possible, so that you have quick access to your information and transactions.
4. Ask your employers to change the direct debit to your new account. Request a change of Electronic Funds Transfer (EFT) by filling out a form with all employers from the last year.
   • If you receive occasional payments by EFT from an employer, you should play it safe and ask them to update your account. A new deposit into a closed account requires some banks to reopen your old account.
   • Remember to move any other automatic deposits, such as Social Security payments.
   • Change the EFT account on your PayPal account, or other virtual wallets, if you use them frequently.
5. Change or stop recurring withdrawals from your account. Many banks will reopen a closed account if an EFT request comes in, and you’ll likely incur overdraft fees if your account was empty.
   • Health insurance, rent and utilities are frequently sent by EFT.
   • Review your bank statements for the last year to determine what automatic payments are deducted from your account.
6. Ask your old bank to remove any revolving bank services from the account. Failure to stop these services could also result in overdraft fees, even after you have closed your account.
   • The terms and conditions of identity theft insurance, automatic transfer to an IRA or other services may require that you cancel each product individually.
   • Be mindful of any automatic transfers you have set up, such as transfers to external savings accounts from your checking account.
7. Wait 30-45 days to be sure all automatic transactions are going to the new account. Each organization that uses EFT may have a processing wait time of 30 days, although some may take extra time to process. Waiting will help also you avoid fees if you missed any automatic transactions.
   • If you are closing a certificate of deposit (CD) or money market account, you may be charged a fee to remove your money and close the account within 6 months to 5 years. These maturity dates require a commitment, or you may lose the interest you have accrued in addition to facing a fee.
   • To be safe, leave some funds in your old checking account to cover any forgotten recurring transactions or outstanding checks.

Transferring the Funds

1. Check the balance on the account you want to close. You should know exactly how much is in your account before you start the process. Download and print a bank statement from your online account.
   • If you believe you may have outstanding payments or uncashed checks, wait until the end of your monthly account cycle to check the balance.
   • Save this document for your records, just in case any questions or problems arise later.
2. Confirm that you are able to transfer funds. The Federal Reserve Board does not allow you to transfer money from your savings or money market account more than six times per month. Your bank may have a transfer or withdrawal limit on certain types of accounts.
   • Call the customer number on the back of your ATM card to check on restrictions. You can also search for your bank’s customer service number online.
   • Transfers between accounts at the same bank count against the limit of 6, so avoid moving money before closing your account.
3. Contact your bank to find out the procedure for transferring funds. You may be able to find this information online, but it’s wise to verify the information with a phone call to customer service. Banks have a variety of regulations and rules for transferring funds out of your account, especially if you’re emptying it.
   • Some online-only banks allow electronic transfers with no fees.
   • The amount of money you’re moving may affect the process; make sure you have the correct information about your situation.
4. Decide how you will transfer your money. Use the information you learned about the procedure with your bank to decide if you need to transfer the money electronically, call customer service, or visit a bank branch.Visiting a branch, if your bank has one nearby, is often the most reliable option.
   • If you’re transferring your money in a bank branch, you’ll need your account number, bank number and routing number for your new account. You will usually be charged a percentage of the amount transferred by your bank.
   • Be sure to have your personal identification handy, such as your driver’s license, so you can verify your identity.
5. Ask your bank to issue you a check. Make sure you’ve verified the amount in your account, and then request a check for the balance of your account. Have it sent to your home address, with a signature required delivery confirmation, for your safety.
   • Many banks only issue balance checks with cashier’s checks. If this is the case, there may be a charge associated with issuing the check, such as $25.
   • Personal checks from your account may be less expensive, but cashier’s checks are deposited more quickly.
   • Some banks offer a wire transfer, often for an even higher fee.
   • If you’re moving from one online bank to another, you should be able to transfer the funds electronically without a physical check. You may experience a delay in the money’s delivery to your new account.
6. Confirm that you have cancelled all bank services associated with that account. Conduct a final check to make certain that all automatic transfers, payments, and services have been completed or moved.
   • Consider asking for an email or mail confirmation from the bank teller or customer service representative.
   • If you bank online, check your account.
7. Deposit your check into your new account. Once your money arrives, it’s important to have access to those funds right away. Watch your new account by checking online or calling your new bank’s customer service, to make certain your money is in the account and you can use it.

Closing the Account

1. Check your old account to verify that it is now empty. After there are no funds remaining, you can close the account. You will need the approval of all the account holders to do this, so ask anyone else listed on the account to go to a branch location with you or stay nearby for approval by phone.
   • Use your bank’s online banking tool, or contact customer service, to check your account balance
   • If your final withdrawal is marked “Pending,” note the planned transaction date, and then check again.
2. Look up your bank’s account closing procedures. Since banks require a range of processes, take the time to make sure you understand your responsibilities, so that you don’t run into difficulties.
   • Most banks do not allow online account closures, so be prepared to call customer service or visit a bank branch.
   • Some banks require special forms or letters that must be notarized.
3. Request verification that your account is closed. You should expect to receive an official letter showing that you closed your account, but it is better to ask. This letter should arrive in 5-10 business days.
   • If you did not transfer your funds before closing your account you should also receive a check for the balance of funds remaining in your account.
   • Contact your bank if you don’t receive your closing documents in 5-10 business days. If these don’t arrive, chances are there is a problem with your account and it has remained open.
4. Shred all debit cards and checkbooks connected with your previous account. Getting rid of these access points will help you to avoid accidental use, as well as potential fraud.
5. Watch both of your accounts for the next 30 days. Make sure your EFT, bill pay and other credits and debits are going in and out of the new account. Simple human error may delay the proper closing of your account.

Warnings

• Be aware that each bank requires different forms of account closure. Call your bank’s customer service number to inquire if you can close online, by mail, by phone, or in-person.
• Don’t close an account that you opened within the last 90 days. Many banks charge a fee of $25 to $50 to close an account that has been open for 3 months or less. Some banks charge a fee if your account is younger than 180 days.
• Not all banks automatically close empty accounts, so be sure to follow through with the closing procedures after you’ve transferred your money.

Sources and Citations

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