Banks offer several financial services that make handling and saving your money easier and safer.
However, you may find yourself in a situation where you attempt to pull money from your account only to find that the bank has closed your account.
Not only can this cause frustration, but it may affect your ability to pay your bills or buy food.
You may be unsure if you can even reopen your account with the bank.
Here’s what you need to know about whether you can reopen a closed bank account and some of the reasons a financial institution might close your account.
Can I Reopen A Closed Bank Account?
It is possible to reopen your account under certain circumstances if the bank has the policies to support that action.
It usually depends on the reason they closed the account in the first place.
Dormant accounts, or those accounts that haven’t seen any activity in some time, are the easiest to reopen.
Commerce Bank, for example, will open an account back up if you deposit some money within a certain amount of time.
Fidelity Bank and Trust usually gives their clients 30 days to make a deposit before closing it.
That’s on accounts that have a zero balance.
However, some banks, like Citizens Bank, will allow their clients to make a deposit for as long as 61 days before switching the account from closed to terminated.
The more complex the reason behind the closed account, the harder it will be to reopen it.
For example, if they closed your account because of fraudulent activity, then it may be impossible to reopen it again.
All banks have certain policies and timeframes in which you can or cannot reopen a closed account.
Why Would A Bank Close Your Account?
There are several reasons a bank might decide to close your account.
Here are some of those reasons, so you can avoid them in the future.
1. Dormant Accounts
One of the most common reasons that a bank will choose to close your account is that it’s dormant.
This means you haven’t deposited any money in the account for some time.
They close these types of accounts for maintenance reasons.
It costs the bank money to maintain an account.
The profit they receive from an active account enables them to maintain it without losing money.
Maintaining an account can extend anywhere from paperwork to providing security services for it.
While a dormant account on its own doesn’t have many costs associated with it, it’s the sheer number of dormant accounts that starts to impact a bank’s profits.
As they add up, the costs of maintaining several dormant accounts can start to affect a bank’s profits.
Reopening a dormant account is one of the easiest ways to deal with a closed account.
When you first notice that the bank has closed your account, you’ll need to first contact them to discover the reason behind it.
If you know that you haven’t deposited anything in your account in some time, then you can probably guess the reason.
Then determine your bank’s policies on how long you have to make a deposit.
Some banks won’t allow you to make a deposit at all.
Instead, they’ll let you open a new account with them.
Others will have a certain amount of time in which you can make a deposit.
If you wait too long, then they’ll terminate the account, and you’ll be unable to reopen it.
Some banks may have a certain amount of money that you need to deposit to activate the account again.
Others will let you activate it with as little as $5.
Some banks will also charge you monthly fees for inactive accounts.
These banks won’t close your account as the fees allow them to cover the cost of maintaining it.
2. Risky Accounts
Another reason a bank might choose to close your account is that you overdraw your checking account too often.
The bank sees these accounts as risky.
Overdrafts and bounced checks are a sign of risk.
Banks don’t like that since it costs them money, too.
While they won’t close an account for a first-time offense, if you continue to overdraw your account, then you can expect them to close it.
As soon as a bank notices that an account is having risky behavior, they’ll monitor it closely.
If the account continues to display risky behavior, then the bank will choose to close it.
In some cases, they may leave the account open, but they won’t allow any transactions to occur.
This is usually done when the account has a negative balance.
Once the client pays off the negative balance, they remove the restriction.
If the account continues to have a negative balance, then the bank will eventually close it.
At that stage, it’s up to the client to pay off the negative balance to reopen the account.
Not every bank will allow them to do that, however.
Some might terminate the account from the start.
Others have a certain time in which the client can pay off the negative balance to restore their account.
If the client is unable to pay off the balance in time, then the bank will pay the debts, themselves, and sell the account to a collection agency.
This type of reason for account closure is a bit more complex to reopen, but it is possible with the right bank.
3. Fraudulent Activity
Banks also pay close attention to behavior that they deem unusual.
It usually means that the client is acting fraudulently.
An example of unusual activity is when a full-time student receives a large amount of money in rapid succession in a short amount of time.
The bank has information about the individual that tells them certain details about the individual’s employment status.
They’ll consider the fact that because the student is full-time, most of their time is likely spent at school.
They probably don’t have enough time to work the kind of hours that would warrant payments of that amount and at that frequency.
As such, they’ll deem the account suspicious and flag it for an investigation.
Depending on the account’s history, they might leave the account open while they perform the investigation or close it.
Another example of unusual activity is with a business account.
The business account may have a sudden series of chargebacks.
This raises a red flag within a bank because it makes them believe that the business is engaging in fraudulent activity.
If the bank suspects fraudulent activity at any time, then it can close the account.
This is to help protect itself and others.
Reopening an account that’s been closed due to fraudulent activity is the most difficult process.
You’ll need to contact the bank first to determine the cause of the closure.
They might ask you for paperwork that explains some of the reasons for the unusual activity in your account.
You might also have to provide other information to reopen your account.
At the end of the day, the bank may decide that you’re too much of a risk and refuse to reopen the account.
They may give you a chance to open a new account with them, but it’s unlikely if they suspect you of fraudulent activity.
Reopening an account that’s suspected of unusual or fraudulent activity is difficult, but it is possible with some banks.
Can A Bank Close An Account Without Naming A Cause?
One of the problems with banks closing accounts is that they don’t always need to give a reason for it.
Unfortunately, the banking system regarding account closure isn’t regulated by the federal government.
As a result, they don’t need to give a notice or a reason for closing an account.
They can just close any account that they want.
That said, it’s rare for banks to do this without a reason.
The competition is stiff among banks.
There are tons of them out there, with more banks opening every day.
To attract clients to their particular bank, they need to maintain a good reputation and relationship with their clients.
If they were to start closing bank accounts without any reason, then clients wouldn’t want to use their bank anymore.
It would be too much of a hassle.
It would also negatively impact their reputation and drive future clients toward other banks.
Because of that, banks typically only close accounts when they have a reason to do so.
The real problem is that they don’t always give notifications that they’re going to close an account.
You may not be aware that there’s a problem with your account until you can no longer access it.
It’s a good idea to check your bank’s Terms and Conditions as well as their Deposit Account Agreement policies.
Any information they have about whether they notify their clients about account closures will be found there.
You can also call your bank and ask them directly.
They’ll also inform you as to whether they’ll return any deposited funds that occurred at that time.
What Steps Should You Take After Reopening Your Account?
One of the most important steps you should take after reopening your account with your bank is to determine if they report accounts to ChexSystems or not.
ChexSystems is a service that compiles data about accounts that have been problematic in the past.
The problem with having your account associated with ChexSystems is that it stays on their record for five years.
Other banks can use that information to determine whether you’re a risk or not.
It can make it difficult to apply for new bank accounts, credit cards, mortgages, or even to apply for a new car.
Reporting to ChexSystems is entirely voluntary on behalf of the bank.
Not all banks will report problematic accounts to them.
It’s worth calling your bank to see if they reported your account while they had it closed.
If so, then you can request that they file an update for your account.
This removes your record from ChexSystems since your account is no longer problematic.
However, not all banks will do this on their own.
It’s worth contacting them and asking them to do so, so you can avoid financial problems in the future.
Can You Close A Bank Account With A Negative Balance?
A negative balance in your bank account means that you owe money to the bank.
Because you owe them money, most banks will not allow you to close your account until the balance is positive.
Some might be able to overlook if it’s a small amount or if you have a good history with them.
In most cases, however, you’ll need to pay your balance before you can close the account.
A problem that some clients face is that their account has a negative balance because of overdraft fees.
If you continue to receive overdraft fees, it can make paying off your negative balance difficult.
In this case, some banks may be willing to remove the fees.
They’ll expect you to pay off the remaining balance.
You usually need to have a good history with them.
The reason you have a negative balance has to be from overdraft fees.
Paying the negative balance can come from anywhere.
You can use your savings, for example, to pay off the negative balance in your checking account.
You can also use deposits that you receive from your job or Social Security to pay off the balance.
Once the balance becomes positive, you’re free to close your account on your own.
To do so, you’ll need to fill out a closing form.
Most banks have these forms at their branches and require you to fill them out in person.
Others have an online form that you can fill out and submit.
If you continue to leave your account with a negative balance, then the bank will eventually close the account themselves and send your debt to collections.
How To Reopen A Closed Bank Account
If your bank closed your account, then it may be possible to reopen it.
Follow these steps to reopen your closed bank account.
1. Call The Bank
The first step you need to take is to call the bank.
It’s important that you understand why they closed your bank account in the first place.
You’ll need to give them some personal information for them to verify your identity.
Then you can find out the reason behind your account closure.
Once you find the reason behind it, you can determine the best action to take to reopen the account.
The bank clerk will also have suggestions.
Since every bank has its own policies about account closures and the steps needed to reopen them, it’s worth talking to your bank specifically to get all the details.
2. Pay Off Debt Or Submit Paperwork
Depending on the reason for your account closure, you may need to do a few things for them to reopen your account.
If your account is inactive, then you’ll want to deposit some money into it.
You can deposit a large sum or the minimum amount that the bank requires.
Once you make your account active again, the bank will reopen it for you.
You’ll want to set up a reminder for yourself to ensure you deposit something regularly to avoid your account from becoming dormant in the future.
In the case of a risky account, you’ll want to pay off any outstanding balance that you have.
You might also need to undergo some sort of training program that the bank has to prove you know how to manage your money.
For fraudulent accounts, you’ll need to start collecting paperwork that explains the unusual activity in your account.
Once you’ve fixed the problem with your account, then the bank will likely reopen it.
You’ll need to act fast to fix the problem before time runs out.
Depending on the problem with your account, you usually have anywhere between 30 and 60 days.
It can take the bank a few days to ensure your account is satisfactory.
They might also request more information.
Reopening your account can take as little as a few hours to as much as a few weeks.
4. Check With ChexSystems
Once your account becomes active once more, you have one more call to make to the bank.
To ensure that you’re not penalized in the future, call your bank and ask if they reported your account to ChexSystems.
If so, request that they update their report to say your account is no longer problematic.
This can save you from several headaches in the future.
Reopening a closed bank account is possible under the right circumstances and with the right bank.
The ability to do so becomes more challenging the more complex the problem is with your account.
You can follow the steps above to reopen your closed bank account.