Key takeaways
- Before you think to close your account, check your bank’s early account closure fee policy to make sure it’s been open long enough to avoid paying any penalties.
- Make sure to update all your recurring payments and deposits with your new bank account information.
- Request written confirmation that you’ve satisfied all the bank’s requirements and the account is officially closed to avoid any surprise fees for inactivity or zombie overdrafts.
The adage, “When one door closes, another opens” can apply to many things -- including the banking industry. By saying goodbye to your existing bank, you may be able to say hello to a new one with higher savings rates, lower fees and a better customer experience.
However, you first have to figure out how to close the door on your current bank. If you’re considering switching banks, read on for everything you need to know about closing your current bank account and terminating your agreement.
How do you close a bank account?
Closing a bank account requires communicating with your bank via phone, a message in the bank’s app or at a branch. No matter how you inform your bank you want to close your account, you should ask for a written confirmation to verify the account is no longer officially open. You’ll also want to have a plan for where you’ll be moving the money in the account.
1. Open a new bank account
Unless you already have another bank account separate from the one you’re closing or you want to leave the banking system for good, you’ll need to open a new account at another bank before you close your current one. This will ensure you have a place to keep your money, receive direct deposits and make automatic payments.
Many banks offer online applications, while others require you to apply in person at a branch. However you apply, you’ll likely be asked to provide some personal information, such as your name, birthday and Social Security number, as well as identifying documents.
2. Cancel recurring payments and direct deposits
Before canceling your old bank account, ensure all your monthly deposits and payments are set up with your new account. These may include:
- Payroll or direct deposits
- Bill payments and automatic transfers
- Subscriptions, gifts or recurring donations
- Credit card payments or transfers
- Loan or mortgage payments
When someone sends a direct deposit to a closed bank account, the bank typically returns the funds to the original sender. For example, if you cancel your old bank account but don’t give your updated direct deposit information to your employer, your paycheck will be sent back to your employer and you may have to contact them (or your old bank) to recover your money.
3. Transfer or withdraw your money
Next, transfer all the money from your old account to your new one, or withdraw it as cash. Make sure any pending transactions have cleared before you do so. Otherwise, you could be hit with an overdraft fee if a previously pending transaction goes through after you’ve already drained your account balance, sending your account into the negative.
Additionally, if your old bank charges a maintenance fee if you don’t maintain a minimum daily balance, you’ll want to close your old account shortly after transferring out your money to avoid a fee.
4. Contact your old bank
Call your old bank or send a secure message through your online banking portal to confirm there are no pending transactions or outstanding charges and the account balance is zero. Then you can ask the bank to close the account.
Some banks require written notice that you want to close your account. If that’s the case, ask your bank for a template form requesting account closure. Each bank may have its own requirements about what information needs to be present in the letter, but your full name, account number, bank name, date and Social Security number are likely to be on the list. Other banks may let you close your account over the phone or online.
Be sure to ask for written confirmation that your account is closed and save a copy for your records.
How to close an inactive bank or overdrawn account
If your bank account has a zero balance with no activity -- such as deposits or withdrawals -- for a long time, the bank may consider it dormant or inactive. Sometimes, the bank will close an inactive account automatically after a certain amount of time has passed. Other times, you may need to contact customer service to reactivate your account, and then close it manually.
If your account has been overdrawn, you may need to pay back the overdrawn balance and any outstanding overdraft fees to bring the account current. Before you can close your account, your balance needs to be at zero or higher.
It could take anywhere from a few days to a few weeks for the bank to confirm that the account is in good standing and that any outstanding issues have been resolved. Then you can follow the steps outlined above to close your account.
Does it cost anything to close a bank account?
Depending on the terms of your banking agreement, you may be charged a fee to close your account. The most common form of this is an early account closure fee, which is charged when you close your account too soon after opening it.
According to CNET sister site Bankrate, early account closure fees are most commonly charged on accounts closed within 90 days of opening and typically range from $5 to $50. Early account closure fees can be found on savings, checking and money market accounts.
Additionally, the type of account you’re closing plays a role in potential costs. Certificates of deposit typically charge an early withdrawal penalty if you withdraw your principal before the term is up.
Does closing a bank account hurt your credit?
Unlike credit cards, bank accounts aren’t included on your credit report. Closing a bank account in good standing has no direct impact on your credit.
If you leave an account with a negative balance for too long, the bank can send the account to collections. This action can hurt your credit score as it will likely be reported to the credit bureaus.
Can you close a bank account online?
Some banks allow you to close your account online, whether on your own through your online banking portal or by contacting a customer service representative through an online channel such as chat or email. But if your bank doesn’t offer an option to close your account online, you can usually do so by calling your bank or visiting a local branch.
The bottom line
Closing a bank account can be a long process with unexpected complications, or it can be quick and painless. It all depends on whether you’ve made the necessary preparations before you contact the bank to formally close your account. Withdraw your funds and reroute all your scheduled transactions so you don’t have any interruption in accessing your money.
Make sure that your old bank account is in good standing– meaning there are no negative balances or outstanding fees you owe -- when you close it. Otherwise, you may find yourself encountering unexpected difficulties or complications when opening new accounts in the future.
Correction: An earlier version of this article was assisted by an AI engine and it used some phrases that were not entirely original. Those phrases were replaced. This version has been substantially updated by a staff writer.
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