What to Do if Your Bank Closes Your Account

Quick Answer

If a bank closes your bank account, contact them to find out why and ask what steps you can take to receive the funds in the account or pay off a negative balance.

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Banks and financial institutions can close your bank account for several reasons without warning or notice. If your bank account is closed, you should find out why and clear up any unpaid balances; any amount owed is still due even when the account is no longer active. Read on to learn the reasons your bank account might be closed, the best steps to take next and ways to prevent future closures.

Reasons a Bank Might Close Your Account

One simple reason a bank or financial institution might close your account is if the account is inactive. Let's say you opened an account at a bank to get an intro or welcome bonus, but you haven't deposited funds or made any other transactions in over three years. The bank could close your account and turn over its cash balance to the state as abandoned property if it can't get in touch with you.

Here are other reasons a bank might close your account:

  • You have a negative balance
  • You have excess overdraft fees
  • You're suspected of fraud
  • You break a bank or account policy

3 Steps to Take if Your Bank Account Gets Closed

Having a bank account closed won't prevent you from opening another account in the future, but before moving on, you should follow up to understand why it happened. Here are three steps to take next:

  1. Contact the bank. Call the number on the back of your debit card or find the bank's contact number online to request information on why the account was canceled.
  2. Settle the balance (or request a check). Ask what your bank balance is. If you have a negative balance, ask what the options are to pay it off. If you have a positive balance, ask how you will receive those funds. For accounts that have been inactive for several years, you may have to contact your state's unclaimed property office to get the cash.
  3. Request to reopen the account. In some cases, the bank may reactivate a dormant or inactive account when you make a deposit or withdrawal. But if reopening an old account isn't possible, you could request to open a new bank account with the same financial institution before you explore other options at a different bank.

The Consequences of a Bank Closure

If your bank account was involuntarily closed because of an unpaid balance or suspected fraud, it could affect your ability to qualify for future bank accounts. That's because banks typically review your banking history from reporting company ChexSystems as part of the application process, and negative history could result in a denial.

The good news is you're entitled to a free copy of your ChexSystems report every 12 months to see what's on it. And if you find banking history errors, you have the right to dispute the records. After paying off an old bank account balance, you can also request to have the record removed from your ChexSystems report.

Another important factor to consider when your bank account is closed is that unpaid bank balances could be forwarded to a collection agency. Collection accounts reported to the credit bureaus can appear on your credit reports and affect your credit scores for up to seven years.

When you're ready to buy a house or car, or obtain another form of credit, negative items like collections on your credit report could come back to haunt you. Experian's free credit monitoring service can help you review what's currently affecting your credit score and make sure all the information on your report is accurate.

How to Prevent Bank Account Closures

Using your bank account regularly and setting up low-balance alerts could help you avoid closures due to inactivity or overdrafts. If you've made a few mistakes in the past and you have a poor banking history, all isn't lost.

Some banks and fintech companies offer second chance banking products that are easier to qualify for and may not require a ChexSystems report. Using this type of account could help you manage your cash and rebuild positive banking history for the future.