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When Should You Close Your Bank Account?

Sometimes, opening a bank account is the easy part of your relationship with a financial institution. Closing a bank account, though, might not be so obvious. However, there are some indications that it might be time to call it quits with your bank account:

The Financial Institution Begins Charging Fees

One of the most obvious times to close an account is when the financial institution begins charging fees, or requiring different actions and activities. If your bank or credit union is adding monthly service fees, or increasing already existing fees, you might want to shop around. Many banks are adding news fees, from paper statement fees, to charging you for using a teller, to a fee for replacing your debit card. Many services that we have come to expect from banks now have fees attached.

On top of that, some financial institutions are raising their ATM fees. Some that used to refund your ATM fees from other banks’ machines are no longer offering that perk. You might also find that your financial institution is imposing activity requirements. If you don’t use your debit card a certain number of times, or engage in direct deposit or bill pay enough, you might be charged a fee. Minimum balance requirements are also becoming more common.

Even though the big banks are cutting perks and raising fees, there are a number of smaller, local financial institutions that still provide truly free checking. Additionally, there are plenty of online banking institutions that have low overhead, and can provide services for a low cost. If something changes with your financial institution, you might want to switch to another bank or credit union.

Your Marriage Is Ending

Some believe that it is best to wait to close a joint bank account with a spouse until after the divorce is finalized. However, this is not the case. As soon as you know that you will be going your separate ways, it is a good idea to close the joint account. You will want to keep records of who gets what after the account is closed, since it will be important during the mediation or when appearing in court before a judge.

Closing the account is especially important, though, if your soon-to-be-ex spouse has been making withdrawals for his or her own benefit and you need the money to pay bills and other obligations. Do your best to convince your spouse that it is for the better to close the account as soon as possible. Indeed, as soon as you realize that you will be divorcing, it is a good idea to separate your finances as much as possible, as quickly as possible. Before the divorce is settled, all of the arrangements will be made, and the disposition of your finances may change anyway. But, until everything is finalized, you might benefit from keeping your finances apart.

You No Longer Want a Joint Account with One of Your Parents

Many teenagers have joint accounts with their parents. It is also common to have a joint account with a parent through college. I had a joint account with my mom through the credit union in my hometown all through college, and until I married. This makes it easier for many college students to get funds from their parents if needed. However, at some point, many people decide that they want their own account – not one shared with a parent. In such cases, it is desirable to close an account.

There are other reasons to close an account. Sometimes you just decide that an account isn’t working for you anymore.

How To Close an Account

Closing a bank account is fairly straightforward. If you have your own bank account, all you have to do is ask to close the account. You can go in person to close the account, and you will be given the money that is in the account. You may be provided a check, or you can withdraw the entire amount in cash. If you are closing an account with a financial institution that is distant, a check will be sent. Even if the check for less than a dollar, the institution will send it to you. You will also receive a letter from the bank or credit union confirming the account closure.

If you are closing a joint account, how it works depends on the account. If your account has two holders, it makes a difference whether the word joining your names is “and or “or. If the account is in your name “and someone else’s, you both need to go in and close the account. If the account is in your name “or someone else’s, either of you can usually close the account, although sometimes the primary account holder has to take care of it. Before you close your account, call the financial institution to find out what you need to do. Knowing exactly what you should do ahead of time can save you trouble later.

Don’t worry about your credit when you close an account; closing a checking or savings account won’t affect your credit report or credit score. It also shouldn’t affect your ability to open another account. (However, if your financial institution reported you to ChexSystems, that might cause difficulties in opening a new account.)

Bottom Line

Your bank account is a very personal thing. You should consider how your bank account fits in with your financial needs and goals. If it no longer suits you, it is time to close the account. Check with the financial institution to determine what you need to do to close the account. In most cases, though, it is pretty straightforward, and you can get your money. Be aware of situations that can affect your ability to access and close an account, though, since that can hinder your ability to get your money.

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Previous Comments
  |     |   Comment #1
Another reason to close a bank account--is when it is not anticipated to be used again in the future.  An example would be an on-line Savings Account that I had with FNBO Direct, that I haven't used (no deposits or withdrawals by me) for the last couple of years.  This account was probably ready to go dormant soon.  Their current rate just dropped from 1.00% APY to 0.85% APY, and with a balance of less than $100, I decided it was time to let go and close the account.  I received a Cashier's check in the mail, including the accrued interest in less than a week.  Less to have to track and remember...

OC Steve
  |     |   Comment #2
This article is way too general.  For example, even if one does not use it for now, there may be some potential benefits in the future.  It is definitely YMMV, each case is different.

I keep most of the credit union accounts since (1) there may be future benefits like rate increase, (2) it is difficult to get the membership once I sign out.

A major reason that I close my accounts is the inactivity fee, if I keep it open for 6 months or longer.  That is a killer since one will not even remember to get some minimum activitity.
  |     |   Comment #3
I recently closed out my primary checking. I had been with Presidential for years but their rate fell way below what was reasonable.....38% and still required a $1000 minimum balance. So I cancelled all my billpays & deposits & all and had planned to go back to PC Banker as they still paid 1% and I was with them before many years ago.

Somehow, for reasons Im still not aware of, I was REJECTED by PCbanker because of something on chexsystems.

Never had a bounced check. Only thing I can think of is maybe too many bank accounts....or now that I think about it...about 10 years ago, when I transfered out of Etrade, they later sent me a bill and said I owed them money. I didnt and it was a mistake. I thought I had cleared it up but maybe not.

Will check with chexsystems.

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