Imagine grocery shopping after a busy day at work. You're finally at the checkout line and ready to pay, but a curious thing happens when you run your debit card through the card reader. Instead of the tinkling bell sound you typically hear once payment has cleared, a message pops up on the screen reading, "Transaction Declined." In addition to feeling embarrassed, you're confused. You know there's money in your account, and you can't figure out why your debit card isn't working.
Once in your car, you call your bank's 800 number to find out what's going on and are told your bank account has been closed.
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How could this happen?
A bank might close your account for several reasons. For example:
- Long periods of inactivity
- Unpaid debts to the bank
- Negative balance
- Too many bounced checks or overdrafts
- Suspected fraud on your account
- Account policy violations
- By court order
What makes account closure challenging is how it can happen without your knowledge. A bank is under no obligation to give you advance warning when it plans to close your account, and you may not have time to plan for it.
Tip: You can avoid most overdrafts by signing up for overdraft protection.
Act quickly
The first step, if your account has been closed, is to contact your bank or credit union. Ask why you're unable to access your funds. Although banks aren't required to disclose the reason, particularly if it's due to suspected fraud or illegal activity, they are likely to be upfront if the closure is due to account inactivity, unpaid fees, an overdrawn account, or policy violations.
If the closure is a result of a negative balance, ask how much you'd need to deposit to get the account back into the black. Then find out how to make a deposit that will be credited to your account quickly.
Request that your account be reopened. In some cases, banks are happy to do so if you've cleared up a negative balance. You could also request that your bank allow you to open a new account with the same information. If that's not possible, it's time to move on to another bank or credit union, somewhere you can set up direct deposits and automatic bill payments. If your original account has a positive balance, transfer funds from the old bank to the new account.
To be clear, while you may need to open a new account elsewhere, it's essential to ensure you're square with your old bank. If you have a negative balance, make a large enough deposit to bring your account to a positive balance. And if you're transferring money from the old account to the new bank or credit union account, make sure you don't transfer so much that you overdraw your old account.
Getting around ChexSystems
Chances are, if your account has been closed by one financial institution, you could have trouble opening an account somewhere else. Approximately 85% of financial institutions count on ChexSystems to make decisions about potential customers.
ChexSystems is a reporting agency that tracks consumer checking and savings account history. Here's a sample of the kinds of banking behavior reported to ChexSystems:
- Overdrafts
- Bounced checks
- Unpaid balances
- Account closures
- Suspected fraud
- Account abuse
It's estimated that about 15% of U.S. banks and credit unions don't use ChexSystems, so those institutions should be at the top of your list. If you're looking for a traditional bank, each of these banks offers a "second chance" account:
- Wells Fargo
- Capital One
- PNC
- Bank of America
- Chase
- U.S. Bank
- Fifth Third
While you may pay a small monthly maintenance fee, each bank provides an opportunity to rebuild your banking history. In addition, check out local credit unions, as they tend to either not use ChexSystems or to be more forgiving toward those with negative ChexSystems histories.
It's a challenge to navigate today's world without a checking account, but fortunately, you don't have to. Even if your bank closes your account, there are other financial institutions that would be happy to open another account for you.
