Closing a bank account isn’t difficult. However, you need to be careful so that you avoid missing automatic payments or direct deposits and steer clear of account fees.
5 Steps for Closing a Bank Account
1. Find Your New Bank
Before you close a bank account — in this case, a checking account — you’ll need to shop for a different place to park your money. When you’re shopping for a new bank or credit union:
— Seek recommendations from friends, relatives and colleagues.
— Search online for reviews of any bank or credit union you’re considering.
— Find out what products and services the financial institution offers. Are you able to pay bills online? Do they offer loans and credit cards?
— Learn about the bank’s operations. Do they have brick-and-mortar branches? How big is their ATM network?
— Ask about the interest you’ll earn on money deposited into your account.
— Inquire about fees, such as monthly maintenance, overdraft and ATM fees. Will any be waived if you maintain a minimum account balance?
— Determine how much money is required to open the account. You typically must make an opening deposit ranging from $25 to $100.
[Read: Best Online Banks.]
2. Switch Your Scheduled Payments, Deposits and Withdrawals
As you’re winding down your old account, you’ll want to set up scheduled payments, deposits and withdrawals with your new account. If not, you may end up missing payments of utility bills, for example. Here are step-by-step directions:
— Take note of every automatic deposit, payment and withdrawal that occurs each month in your old account. Pay close attention to payments such as credit card and utility bills.
— Reroute direct deposits to your new account. You’ll need to complete paperwork to shift direct deposits of paychecks and Social Security checks, for instance, to your new account.
— Ask when the newly scheduled direct deposits will start. Once you’re aware of that date, schedule payments and withdrawals from your new account. Then, cancel scheduled payments and withdrawals for your old account.
— Keep enough money in your old account to ensure any overlooked checks or automatic payments clear so that you don’t rack up penalty fees.
3. Transfer Your Money to the New Account
When you’re sure that no more automatic payments and direct deposits are coming out of your old account, move any remaining money to your new account. Ideally, you should transfer the funds electronically to make the transition as smooth as possible.
[Read: How to Switch Banks: A Step-by-Step Guide.]
4. Contact the Bank to Cancel the Account
After the final transfer occurs, it’s time to shut down the old account. Typically, you must call or visit your financial institution to do this. However, some banks and credit unions will let you close an account online.
Be sure to download any statements you may need for purposes such as completing your tax return before the old account is closed.
In general, state laws require banks and credit unions to close an account in a “reasonable amount of time,” according to the Consumer Financial Protection Bureau. Keep in mind that some financial institutions might hit you with a fee if you close an account shortly after you opened it, says the bureau.
It’s recommended that you wait at least a month to close your old account after setting up the new one. Doing this helps ensure there’s enough money in the account to cover transactions you may have forgotten.
5. Ask the Bank to Confirm Closure
Be sure to get written confirmation that the bank or credit union closed your old account. Bank of America, for example, will notify you by email if it has your email address on file. In addition, it will send your final account statement by mail.
Once you’ve confirmed the closure, destroy all checks and debit cards connected to the account.
[See: Best Checking Accounts]
Can You Close a Bank Account Online?
Some banks and credit unions allow you to close an account online. But many financial institutions require you to close an account in person, over the phone or by mail.
Does It Cost Anything to Close a Bank Account?
Your bank or credit union might charge a fee to close your bank account, particularly if you shut down the account soon after you opened it. SouthState Bank, for example, charges a $25 fee if you close an account within 90 days of opening.
In addition, you may need to pay other account fees. For example, you might owe an overdraft fee because the dollar amount of a check or debit card transaction exceeded your remaining account balance.
[Read: How to Choose a Bank]
How Long Does It Take to Close a Bank Account?
In many cases, it should take only one or two days to close a bank account. But the process could last longer, perhaps several weeks, if any glitches occur. For instance, the closure could be delayed if you didn’t leave enough money in your account to cover automatic payments or withdrawals.
Does Closing a Bank Account Hurt Your Credit?
The mere act of closing a bank account won’t hurt your credit. But it might if your account isn’t in good standing.
If your account balance is negative, this information will show up on your ChexSystems report. ChexSystems gathers data about consumers’ banking activity and sells it to financial institutions. Your ChexSystems report isn’t the same as your credit report.
Now, if your account balance remains negative for a long time, the bank or credit union may turn over your account to a collections agency. The agency might report this activity to a credit bureau, and this black mark on your credit report could hurt your credit in the form of a lower credit score.
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How to Close a Bank Account originally appeared on usnews.com
