Why a bank closes account and what to do about it
You may not think it could happen to you. A bank generally can close your account at any time and for any reasonand sometimes without notifying you in advance. Reasons a bank may shut down your account include using your account very little or not at all, or bouncing too many checks.
While it may come as a shock when your bank account is closed, you can take steps after it happens to safeguard your money. In addition, you can make some moves to help ensure the bank never closes your account.
What Happens When
Closes Your Account?
Your bank may notify you that it has closed your account, but it normally isn't required to do so. The bank is required, however, to return your money, minus any unpaid fees or charges. The returned money likely will come in the form of a check. In some cases, your bank may close an account and switch it to a different type of account.
Why Did the Bank Close Your Account?
Your bank may shut down your account for several reasons. Here are eight of them.
Dormant Account
a Bank
Let's say you haven't written a single check in the past two years or have made only two debit card transactions in the past three years. Your bank may decide that because of the lack of regular activity, it's going to close your account. Typically, though, it takes several years of little to no activity for a bank to pull the plug on an account.
Generally, a bank considers an account "abandoned" if the account holder fails to initiate any activity over a three- to five-year period, or if the account holder hasn't contacted the bank during that time. The bank is usually required to contact the account holder if it decides to close the account.
If money in an abandoned account goes unclaimed by the account holder, the cash may be turned over to a state's unclaimed property program.
Zero Balance
If your account contains no money, the bank might close it. Simply because an account says there are no minimums, does not mean the account should remain empty for days or months. The time frame will vary based on your individual bank and its practices. Another risk you take is that any monthly fees could reduce your balance to below zero, so it's important to keep tabs on your bank account balances.
Bounced Checks or Overdrafts
If you've racked up too many bounced checks or too many overdrafts, your bank may close your account.
When you repeatedly bounce checks, your bank likely will shut down your account.
In the case of overdrafts-when your bank covers transactions, even though there's not enough money in your accountyour bank likely won't close your account until there's enough money in it to at least pay for the overdrafts and any overdraft fees. Once that happens, the bank might close your account. Overdrafts can happen when you write a check, make a debit card payment or carry out an ATM transaction that sends your account balance into negative territory. Too Many Transfers
Banks impose limits on how many transfers you can make between certain types of accounts, such as a checking account and savings account. If you exceed those limits, the bank might close at least one of the accounts. Or, in the case of a savings account where you repeatedly exceed the Regulation D transfer limits, it could be converted into a checking account instead. Suspected Identity Theft
If your bank thinks you've been the victim of identity theft, it may close your account to prevent further fraudulent activity.