Don't let your money sit fallow.
The odds are good that once you've reached adulthood, you've had at least a few different bank accounts. Your first account as a kid was probably a basic savings account opened for you by a parent or guardian. Then you likely graduated to a checking account once you got your first job as a teenager (and if you were under 18, you likely needed that adult's help again), so you'd have a place to deposit your paychecks.
But you're older now, and perhaps a $200 paycheck from your retail job at the mall no longer makes you feel unimaginably rich. Maybe you now have multiple bank accounts, possibly even with multiple banks. But what if you no longer use one of those accounts? Here's why you should consider closing it.
1. You could incur minimum balance fees
I'm living proof of what could happen if you stop paying attention to a bank account. Last year, in the hustle and bustle of life, I neglected my old savings account that's linked to my main checking account and ended up losing $50 to fees since I let the account balance slip below the minimum requirement. Don't let this happen to you! I resolved my issue by adding money to the account, and I intend to keep it open, as it gives me overdraft protection for my checking account, and I think that's worth having.
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If you have a bank account with a minimum balance requirement that you've stopped using altogether, consider closing it. The last thing you need is for an automatic payment you set up long ago to be debited out of the account, leaving you below the minimum (or worse, overdrafting your account). If your bank charges monthly maintenance fees, you could end up below the balance requirement that way, too, if your balance was already on the low side.
2. Your bank could slowly drain the money away
Let some more time go by without using that account, and you could find your bank slowly eating away at whatever money is left. According to Forbes, government regulations determine what happens to unused bank accounts, so the way banks get around losing control of those accounts is to charge inactivity fees. This either leads to the account holder noticing that the bank is taking their money, or eventually the bank fees will bring the account balance down to $0 -- at which point, the bank will just close the account due to inactivity. Don't let this happen to you. Keep your money and close the account on your own terms.
3. You probably need the money in an unused account
Chances are, you need every dollar these days to account for rising costs. So if you think you may have an extra bank account lying around that still has some cash in it, it's a good idea to transfer that money to an account you do use, and then formally close the account. Your bills, emergency fund, and debt repayments will all thank you.
Be careful
A quick word of caution if you've just remembered an old bank account that you no longer use and can now close: If the account is overdrawn, you'll need to settle up with the bank before closing the account. While closing a bank account that's in good standing won't impact your credit score (banks don't report account activity to the credit bureaus), if you're in the red and don't pay your bank back, it could send the debt to collections, which will hit your credit report.
You might also get reported to ChexSystems, a reporting agency that collects banking information on consumers. If you end up with too many black marks with ChexSystems, you may find yourself unable to open new bank accounts in the future. So proceed with caution and be sure to pay off any money you owe the bank. And if you struggle with overdrafting your account, there are ways to break free.
There's no reason to keep a bank account you no longer use. Transfer any remaining money out of it and close it, so you can forget about it for good.
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FAQs
Whether you're moving out of the area or switching savings accounts to get a better rate, closing a bank account properly is essential to protect your financial security and avoid unnecessary fees.
Why should I close my bank account? ›
Whether you're moving out of the area or switching savings accounts to get a better rate, closing a bank account properly is essential to protect your financial security and avoid unnecessary fees.
Is it good to close unused bank accounts? ›
Closing an account may save you money in annual fees, or reduce the risk of fraud on those accounts, but closing the wrong accounts could actually harm your credit score.
What is a valid reason for closing a bank account? ›
There are many reasons banks can close your account without notice. The most common reasons include suspicious account activity, too many overdraft fees and account policy violations.
What happens if I don't close my unused bank account? ›
The Importance of Not Leaving Your Savings Account Inactive
As a result, the bank may slap you with a penalty charge. This can eat into your hard-earned savings over time, eroding your account balance and causing you to lose out on any interest you might have earned.
What happens when you close your bank account? ›
If you close a bank account but still have funds in the account, you should receive a check from the bank for the remaining funds. If your local bank branch closes, you still have access to your account and funds at other bank branches or online.
Why would a bank ask you to close your account? ›
For instance, your bank may suspect you're a victim of identity theft or that your account is engaging in money laundering or wire fraud. Excessive bounced checks or overdraft fees: Banks often close the accounts of customers who frequently bounce checks.
What do you write when closing a bank account? ›
I, [Your Name], hold a Savings Account in your bank. Due to some personal circ*mstances, I am unable to maintain the account and would like to close it. Please find the account passbook enclosed with this letter. I request you to initiate the account closure process at the earliest.
What is the right to close an account? ›
The Bank may close any account with or without cause at any time. The Bank shall give you either oral or written notice of its intention to close the account. If given in writing, the notice will be forwarded to your last address as shown on our records.
What happens to your money if a bank closes your account? ›
You'll get your money back (usually). You may receive a check in the mail for the remaining balance, unless the bank suspects terrorism or other illegal activities. You can also go to a branch and receive a cashier's check for the account balance.
Your bank could slowly drain the money away
This either leads to the account holder noticing that the bank is taking their money, or eventually the bank fees will bring the account balance down to $0 -- at which point, the bank will just close the account due to inactivity. Don't let this happen to you.
Do banks automatically close unused accounts? ›
Yes. Generally, banks may close accounts, for any reason and without notice. Some reasons could include inactivity or low usage. Review your deposit account agreement for policies specific to your bank and your account.
What happens to old unused bank accounts? ›
If a current account or savings account is left inactive for a specified period of time it will be declared dormant by the bank, meaning it's inactive or no longer in use. But if there's any money left in it, you may still be able to track down the account and reclaim any funds.
Is there a negative to closing a bank account? ›
Closing a bank account that's in good standing won't hurt your credit score. If you have a negative bank balance, however, it's important to resolve the balance before closing the account.
Does closing accounts hurt your credit? ›
While it might seem like holding fewer credit cards could help your credit, losing the available credit limit on the closed account can increase your utilization rate, which can hurt credit scores. If you're considering closing a bank account, however, be assured that it will have no direct effect on your credit.
How long should I wait to close a bank account? ›
“Sometimes banks charge a fee for closing an account within a year of its opening. To avoid paying account closure charges, you should wait at least one year,” says Shetty.
Does closing bank account close credit card? ›
They are not linked to each other except that you are the common entity from your side and the bank is the common entity from its side. Your credit card will continue to be valid and active even if you close your savings bank account.
