What to do if your bank closes your account and how to avoid it

There are steps you can take to prevent the nightmare scenario of an unexpected closure

businessmen sitting on chained bills
If a bank closes your account, it isn’t required to notify you
(Image credit: Getty Images)

It sounds like a bad dream, but for some account holders it's actually happening. "Banks are evicting what appear to be an increasing number of individuals, families and small-business owners," according to The New York Times — and "often, they don't have the faintest idea why their banks turned against them."

Unexpected account closures can lead to myriad issues. While sometimes you'll get a letter notifying you that your account is being closed, if you don't (or you don't see it), you might "discover that [your] accounts no longer work while [you're] at the grocery store, rental car counter or A.T.M.," said the Times. In turn, you might not be able to pay your bills on time, which can negatively impact your credit score, or for small businesses, making payroll might be tough.

Why would a bank close your account?

There are a number of reasons that a bank might close your account:

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  • You haven't used your account much in several years.
  • You have a zero or negative balance.
  • You've frequently bounced checks or overdrafted your account.
  • You've made too many transfers.
  • You have what the bank considers a high-risk occupation (per Forbes, this may include "gun sales, marijuana sales, online gambling or escort services.")
  • You've had a previous criminal conviction that you didn't report to your bank, or you were convicted after you opened your account.
  • Your bank thinks you're the victim of identity theft.
  • Your bank has noted suspicious or potentially illegal activity.
  • Your bank has made changes, such as closing branches or stopping business in your state.

What happens if your bank does close your account?

"If a bank closes your account, it isn’t required to notify you, so you might not receive a notification informing you of the closure," reported CNBC Select, but it "is required to return any money that may have been in the account." The only exception here is if "the bank suspects terrorism or other illegal activities," per Time. But in other cases, you can expect to get a check in the mail or see a deposit in another account with the bank.

Additionally, per Time, "your account may be frozen," which means that "debits will be blocked and deposits won't make it in." Know that while an account closure "typically doesn't have a direct impact on your credit score (like, say, having your credit card closed on you), it could become a problem if your account has any outstanding balances, such as unpaid overdraft fees," CNBC Select explained.

How can you prevent your bank from closing your account?

If all of the above sounds like a nightmare to deal with, luckily there are steps you can take to avoid an unexpected closure:

  • Handle checks with caution. As The New York Times explained, "fraud involving mail theft and checks has roughly doubled in recent years," which has meant that banks "have turned up the dials on their check-fraud algorithms." You can avoid an account closure for this reason by avoiding check fraud altogether. To do this, avoid mailing checks (and if you do, take them "directly to a post office," suggested the Times), and also "try not to accept a check from individuals you don't know, in case they are trying to rip you off," advised the Times.
  • Stay in communication with your bank. While your bank's customer service might not be that helpful after your account is already closed, staying in touch while your account is open can prevent a closure. According to the Times, it can pay off to answer your bank's calls and emails and to let them know in advance if you're making any big financial moves, such as a notable lifestyle shift or a home sale.
  • Sign up for alerts and notifications. Per CNBC Select, you can "lessen the risk of your account being closed" by monitoring your account balance and enrolling in notifications to know if it falls below a certain amount or when certain transactions or deposits occur. You might consider linking your account to another so funds are transferred in if your balance gets too low.
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