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If you found a bank account that offers better terms or features, it may be time to break up with your current bank and move on to greener pastures. Fortunately, closing a bank account and switching to a new one is a routine process that shouldn't take much time or cost you anything if you follow the steps below.
How Do I Permanently Close My Bank Account?
Banks often give you three options for closing a bank account: Visit a bank branch, submit a written cancellation request or call customer service.
Before going forward with account closure, there are some important preliminary steps to take to ensure the account is closed in good standing and without any pending direct deposits or bill payments. Here are the steps to follow:
1. Settle Unpaid Balances
If your account is in the negative, the bank typically will not allow you to close the account. If the balance remains negative for long enough, however, the bank might decide to close the account and send the unpaid balance to collections. An account in collections can be added to your credit report and hurt your credit score.
Unpaid overdrafts can also negatively affect your ChexSystems report, which is a banking history report that financial institutions typically pull when you apply for new checking accounts. Poor banking history can result in your applications getting denied, so make sure your account is in good standing by taking care of any outstanding balance.
2. Update Your Direct Deposits and Bill Payments
If you have direct deposits or autopay set up to pay bills, update the payment information to your new checking account. Reviewing your bank statements can help ensure that you catch any automatic bill payments that may be flying under the radar.
Keep an eye out for any correspondence from employers or creditors who may be having a hard time issuing or collecting payment. Like a negative bank balance, bills that go unpaid due to incorrect billing information can be sent to collections and hurt your credit score.
3. Transfer Cash and Close the Account
Once all pending direct deposits and payments clear, transfer the remaining funds in your old account to your new one and move forward with the account cancellation. You may be able to withdraw the balance of your account using a check or an electronic transfer.
The specific steps you need to take to close an account can vary; directions on how to cancel are usually outlined on the financial institution's website or within your deposit account agreement.
How Long Does It Take for the Bank to Close the Account?
If your account has a positive (or zero) balance and you have no pending transactions, the bank could close your account as soon as you make the request. But having pending transactions or unpaid fees can prolong the process. That's because you'll likely need to bring the balance positive and/or wait for deposits or payments to fully clear before you can close the account.
Another factor to consider before closing an account is how long it will take your employer to process the updated direct deposit. Closing your account too soon could mean missing a paycheck if you don't provide new direct deposit information to your employer in time. Depending on the situation, it could make sense to keep the old account open for a few months to settle any remaining transactions.
Can I Reopen a Closed Bank Account?
Once a bank account is closed, there's generally no going back. However, there is an exception: Some banks may reserve the right to reopen an account if another payment or deposit comes through. Check the terms of the banking agreement to find out the policy on transactions after closing.
If you discover an old account has been reopened because of a new transaction, withdraw the money or deposit funds to clear the balance. Then close the account again and make sure the person who paid you or billed you is updated with your new banking information.
Does Closing a Bank Account Hurt My Credit?
Bank accounts are not a factor in your credit score, nor are they listed on your credit report, so closing a bank account won't have a direct impact on your credit. And this action shouldn't have any effect on your credit score at all as long as your account isn't closed with a negative balance. If you attempt to leave an account behind with unpaid overdrafts or fees, this can hurt your credit because the account could be sent to collections.
Since an account in collections can stay on your credit report and hurt your score for up to seven years, it's important to keep your bank account out of the red.
The Bottom Line
A bank account can be closed fairly quickly as long as your account is current, and the act of closing a bank account won't help or hurt your score on its own. If you're looking to make moves that could help improve your score, knowing what's in your credit report is a good first step.
Experian offers free access to your credit report and credit score based on Experian data. With a free Experian membership, you can review your credit report and scores to see where you stand. Plus, you'll get free credit monitoring that can help you keep an eye on your credit and take steps to address any potential issues.