Bank accounts can be expensive and frustrating, depending on what bank you go to. Your bank account woes might be reason enough to close your account and leave your bank. Here are some common reasons why people might close a bank account.
There are many forms of financial well-being in the world today, and not everyone handles their financial affairs in the same way. What works for some may not work for others, so it’s important to be mindful of all your options and do your finances in the way that works best for you. Sometimes this is going to include whether you are banked or unbanked, and what bank you use. If you need to know whether you should ditch your bank account, take a look at the tips below.
Reasons to Close a Bank Account
You may want to close your bank account because there are problems with your account, or you’d like to move to a different bank. You may not want to leave the banking system entirely, but have a reason for closing your account. Here are some common reasons for closing a bank account.
1. Poor Customer Service
There’s nothing like some terrible customer service to put you off from a service provider, especially when ill customer treatment seems to be a regular occurrence. Or maybe the customer service at your bank isn’t awful, but just isn’t great or very personable.
Banks today have become giant corporations where a customer can go into a bank and never meet with the same person twice. This can create a level of disconnect between employees and their customers and thus foster negative and impersonal relationships between you and your bank.
By moving to a new bank, or by using alternative financial services like Check City’s Check Cashing Services, you can find the personal, warm customer service you deserve.
2. Becoming Unbanked
A new form of financing has arisen and it’s called being unbanked. For a lot of people banks are the command central of all their financial needs, but for an increasing number of Americans banks have become unnecessary and costly.
Dealing with their finances entirely outside of the banking system has become an easier and safer way to deal with their money. Being unbanked also helps them avoid dealing with the overbearing costs they would experience inside the banking system.
If you’re moving, there might actually be one other thing on your already giant to do list—switching banks. Not all banks exist everywhere, so if you’re moving there’s a potential your bank isn’t going to be in your new area, and doing all of your banking online or via mail doesn’t always work.
The open hours of most banks can be rather inconvenient. Banks often close at 5 pm meaning that if you need to cash a check on a weekday, but you work normal business hours, you’re out of luck. However, alternative financial services provide extended business hours during the weekday so you don’t run into this problem. A different bank may also have more convenient hours than your current bank does.
4. Requirements and Fees
You might need to leave your bank because the minimum requirements or fees aren’t something you can keep up with, or are too much for you. If you can’t manage the minimum required amounts for your bank account or the frequent fees to keep and maintain it, then it may be time to say goodbye.
Bank account fees can be high and unpredictable. Some banks charge fees to do a few transactions a day, to open an account, for overdrafts, and even fees just to hold an account at their bank. Many people are just tired of spending extra money because of their bank account fees, and others just can’t afford to have any surprise, extra expenses like that.
5. Switching Banks
Sometimes you want to leave a bank or credit union in favor of a new one. It’s a good idea to go bank shopping a bit, doing your research and reading the terms and conditions of each bank option before settling on which one will work best for you and your lifestyle.
6. Bank Insurance
The Federal Deposit Insurance Corporation (FDIC) is a government corporation that provides banks with insurance. If your bank is insured with the FDIC then your money is insured in case something were to happen to the bank. This would be the most important reason to leave a bank.
If your institution doesn’t carry insurance then you may end up losing your money if the bank goes out of business! You can check your bank’s insurance status at www.fdic.gov. This insurance protects your checking and savings accounts for up to $250,000. If your bank isn’t insured, run to another bank to better protect your money.
7. Not Tech Savvy
You may not be good with technology and may not want to deal with the increasingly online world of banking. This can also lead many households to be unbanked or switch to more traditional feeling banks or credit unions, so that they don’t have to deal with how much banking is now done strictly online.
Or your bank isn’t technologically inclined, and this might also keep you from opening an account with them. It all depends on who you are and what you like. Technology is advancing at an incredible pace. Many banks now offer free Apps for your smart phone that enable you to check balances, transfer money, accept payments, and even deposit checks.
How to Close a Bank Account
There is an ideal process to follow when closing an account. By following these steps you’ll avoid bothersome mishaps and fees when closing your bank account.
1. Stop autopay
If you have any automatic payments set up you’ll want to stop all of those before closing the account.
2. Clear all your charges
If you have any charges you’ll need to pay all of those before you close your account. You’ll also want to make sure all those payments process completely before you close the account. Also make sure that any checks you’ve written out have been deposited and withdrawn from your account, because if your account closes, and a friend tries to deposit a check you wrote to them, that could give you problems and fees to deal with.
*Tip: If you’re worried about making sure all your checks, fees, and autopayments are taken care of, you can try putting your account in hibernation for a bit before completely closing it. You do this by keeping the minimum balance in the account for a while, so the account is prepared if something someone withdraws from it. This way you can be sure to avoid harsh overdraft, or bounced check fees.
3. Download documents
Download any important documents for your personal files. Files you might want to download from your bank before closing your account with them would be your statements and transactions.
4. Take money out
Now that you’ve taken care of all the business affiliated with your account, you’re ready to take out your funds. You can use a money order to help you easily move funds.
5. Close the account
Once your money is removed you can officially close the account. Generally, you can close your account by going to the bank in person, over the phone, by mail, or online, but every bank is different, so talk to your bank to know for sure what their process for account closure might be. Don’t forget to get a confirmation of the account closure afterwards.
6. Shred old checks and cards
Now that your account is closed you don’t want to accidentally use the checks or cards linked to that account. Make sure you shred them before getting rid of them so that no one else can use them either.
What Happens When You Close a Bank Account?
Some people worry about how closing an account might affect their credit score, but closing a bank account won’t damage your credit score at all. Actually, the only thing that helps or worsens your score are things that have to do with credit, like credit cards and loans. Regular bank activity that only has to do with your bank, and not credit, borrowing, or fees of any kind, won’t do anything to your score.
The only reason closing a bank account would hurt your credit score is if you have a lot of unpaid fees on that account, or if you have debt with that bank. That is why it’s smartest to pay off any debts, fees, or negative balances you have with your account first before trying to close it. Closing it won’t get rid of these charges, they’ll still be there even after you close the account.
There are many valid reasons for closing a bank account. Whether you are leaving the banking system in favor of alternative financial services, or merely switching banks, you can use these tips to make the transition smoother.
Read the book, “All Our Kin: Strategy for Survival in a Black Community” by Carol Stack to learn about debunking the myth that poor families are inherently unstable or irresponsible.
Read “the Unbanking of America: How the New Middle Class Survives” by Lisa Servon to hear about her in-depth, personal study on the unbanked of America.