For a bank you don’t use, it makes sense to close your account. Perhaps you just found much better companies, or you can’t justify a monthly fee for the services received. Or you didn’t get a good experience with customer support.
Luckily, you’re not trapped to stay with your bank forever. Unless you have some pending payments, you can close a bank account in five minutes or less.
But before you do it, you must take two facts into account.
- Your habits have major influence over your finances, more than the banking brand you choose. If that’s the problem, switching or closing accounts may not be the solution.
- If you plan any important decisions in the future, stop to think of how closing the account may affect your credit score. Then, it may be wiser to keep it open but downgraded to the point you can maintain it easily.
Let’s assume you’ve reviewed those cases and still want to close. In the following chapter you can see how to do it.
How to Close a Bank Account?
Most brands let you complete the process online. But you can’t accidentally close your account. There are verification steps required: probably the same documents you used for registration.
Before you proceed with the account closure, it’s beneficial to educate oneself with all the varieties of banking scams.
If you have those prepared, closing the account should only take a few minutes (with the right customer service). Nobody wants to take days of trial and error, uploading files until you pass the verification.
Some banks have the option on the site already, so you click, provide the documents, and sign. Others make you request the cancellation to client support instead, who will guide you through the steps. In either way, you may need to wait around 24 hours before the action becomes official.
That’s the simple explanation. The hard part, however, is not closing your account, but understanding the consequences of doing it. We wish it were as easy as closing, and that’s it. But:
- What will happen to your credit score?
- What if you had some money left in that account?
- What if you had automatic payments scheduled?
Some banks may just close the account, not remove it entirely. It’s a smart move in case their clients decide to re-open later in the future. But it’s also their opportunity to charge you “inactivity fees.” These charges may add up, even with a balance of zero dollars.
To avoid these surprises, always get confirmation from their team that your account is officially closed.
As for alternatives, there are two instances (which we don’t recommend) where the bank “closes the account for you:”
a. An overdrawn account for over 45 days or repeatedly bounced checks
b. Receiving too many fraud disputes on that account
c. Not paying for inactivity fees
In any case, your bank must legally inform you before they take this action.
When is It a Good Idea to Close Your Account?
You should never close one while still keeping a balance in the account. Before closing, plan how to manage your money:
#1 Get another payment method
If you don’t want an account anymore, but you would still like to move money around, you can take a look at the different payment options you might have. Will you choose a better bank or a third party credit service? Don’t close until you have your new account opened.
If you want to go back for some reason later, ask the staff about the process to re-open a closed account.
#2 Update payment methods
You likely had multiple subscriptions tied up to your bank account. Now that you closed it, they may all stop renovating and cancel.
Before closing, go to your account and look at the services that are currently linked to your bank account. Take this list and visit those subscriptions, one by one, replacing your payment method.
We recommend to have it all ready before you close the account. Some services may require 1-2 business days to verify new payment methods for security reasons.
If you were expecting payments shortly, inform the sender about this change and where to send it instead (or delay it).
Remember, your bank won’t let you close the account until you complete all your payments safely.
#3 Transfer the amount
a. Go to your local branch and ask for a paper check with the remaining sum. But beware of the risks, because now that you don’t have an account, you may not get the money back if you lose the check.
b. If you close the account in person, you can withdraw money from there directly.
c. Bank transfers have high limits and complete within 24 hours. It’s the best choice when you already have another account where to send the funds. Here, you can learn more about how long a bank transfer takes (and why it may delay).
How Long Does a Wire Transfer Take?
People often don’t think of wire transfer anymore because of the many options out there. For fast, small payments, you may choose a service like PayPal or similar. But what if you need to move large amounts to another country? Imagine those fees adding up.
For a few dollars, wire transfers complete large transactions within 1-3 business days in the US (up to five days internationally). When both people have bank accounts, transfers prove to be one of the most secure payment options (as long as you trust who you’re paying and you don’t expose yourself to a wire fraud). Remember to include the wiring fee of $15-$50 (consult your brand), or the transfer may not complete.
Some people would prefer instant transfers to avoid wasting time. But when you think of larger amounts of money (around $250,000 per day), this delay could be a security advantage.
As a general rule, banks cannot reverse wire transfers once you approve it (there may be a 30-minute window for it). If you’re concerned about potential fraud and can prove it to the bank, the receiver bank may recover the money if the other person hasn’t taken it yet.
The easiest way to revert is to trust a person who will send you the funds back if you made a mistake. If you’re concerned about this feature, you should look for alternatives, not wire transfer.
When will the money arrive?
It should take more than 24 hours when sending across the US. But when moving internationally, it depends on the bank branch and country.
- Does the recipient bank close on weekends?
- Is there a public holiday in their country?
The client will likely wait until the next business day. Even on holidays, the delay doesn’t go beyond an extra 24 hours.
But no matter how reliable banks are, they can still make mistakes. Your wire transfer may delay a few days due to these exceptions. They may have sent the wrong amount to the wrong entity, or they sent the same amount twice, for example.
How Closing an Account Can Affect Your Score
If you took all the steps correctly, the event should have little to no effect on your score. A different story would be if you left your account overdrawn with payments delayed.
Now, your credit score calibrates based on your number of credit lines and average history length. Some banks will let you close the account while still keeping your credit cards, which is why it shouldn’t be a problem.
But others have Terms & Conditions that require an account, or they close your cards too (credit score drop). Unless you opened them very recently, you should either not close your account or create a new one. If you lose decades worth of history length, closing the account ends up costing more than your current monthly/annual fee.
You may find yourself with no choice but to close your cards and lose your score, which is okay. Then, you might want to wait and use that credit score for your financial decisions first, then close the account. After a few months, you should see your score rising again. You can also take these steps to increase your credit score.
The Bottom Line
With the verification documents, you can close your account in no time. But there is a wrong and right way to do it, which could affect your credit score, fees, and subscriptions indirectly.
Even after you close the account and everything seems to be over, your bank may take care of the pending payments you missed. If you don’t know what you owe, you will likely skip some payments, which affect your credit score the most.
But how can they ask a closed account for payments? They delegate to a collection agency instead, which gets the debt back to you. Whether you paid or not, it sticks on your credit history for seven years. If that debt appears in your Chex report, it may limit what banks accept to work with you.
Because of it, it may be wise to leave a couple of hundred dollars so that you can cover those unexpected transactions.
The situation becomes more complex as you consider more credit lines. If you want to close a joint account, you then need to consider the other person’s influence too.
But don’t worry. Even if you make a mistake, most banks will let you re-open and keep working with them.