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Breaking up: How to close a bank account

July 16, 2020 • 4 min read

What we'll cover

  • How to identify a new bank

  • How to close out an old account

  • What to do once you have closed an account

Breaking up with your bank can be hard to do. After all, you've been through so much together — lost debit cards, new loans, a mortgage — that you’ve never bothered think about how to close a bank account. But now you found someone new (maybe you met them online?) who's got better interest rates, fewer fees, and gets you.

Or perhaps you are opening a new account for an entirely different reason but are curious about how hard it would be to close, should you decide it’s no longer needed. (We know, commitment can be hard.)

Regardless, knowing how to close a bank account can be crucial. Follow this guide to help you get a fresh start without a messy split.

Step 1: ID your new bank.

Before you break the news to your old bank, you'll need to find a new one. Maybe you already have one in mind — or perhaps you need to do some research.

Identifying the right bank doesn't have to be tough — but it does come down to the details. Consider what types of account features you need, such as checks, debit cards, overdraft protection, direct deposit options, bill pay, or person-to-person payments. Always look at the interest rate and annual percentage yield — the more frequently the bank compounds interest, the more interest you’ll earn. And don’t forget fees! Take a look at any minimum balance requirements, monthly maintenance fees, transfer fees, or ATM withdrawal fees, and keep those numbers in mind as you compare banks.

Whether you’re considering an online-only bank like Ally, a brick-and-mortar bank, or a credit union, these are all important items to keep top of mind.

Step 2: Review your old bank's policies.

Before closing your account, inquire if your current bank charges account closing fees (or penalties). While you likely won't be charged for closing a basic savings account, you might have to pay for other accounts, like money market accounts. And if you withdraw all the funds from a certificate of deposit (CD) before its maturity date, you typically have to pay an early withdrawal penalty.

Step 3: Stop all account transactions.

Cancel any automatic deposits that are tied to your old bank account. For example, if you have all or part of a paycheck directly deposited into your savings account, try to have your direct deposit set up at the new bank to avoid the need for a paper check — wait for the direct deposit to start at your new bank before closure.

Chances are, you might also have automatic bill pay or other withdrawals connected to your bank account as well. So, before you close your account, transfer these to a different account (either an existing or new one). Otherwise, you could miss a payment or be subject to late fees or an overdraft charge.

Step 4: Transfer your balance.

After you've cancelled your automatic transactions, it's time to withdraw the majority of your remaining balance and move it to another account. It’s a good idea to contact the bank directly to ensure the account is closed and all funds are removed. You want to make sure you collect all of the interest you are owed and that the account is truly closed. In fact, consider this a “check it twice” item — you really want to make sure the bank account doesn’t remain open!

With this strategy, you're better prepared to avoid a scenario known as a zombie account — a situation where some banks automatically reopen a closed account if a transaction occurs.

Step 5: Make it official.

Depending on your personal preferences and your bank itself, you could have the option between closing your bank account online, in-person at a local branch, or over the phone.

Some banks may require you to submit a written request. This request likely needs to include your name, address, and account number. If you have multiple accounts at the same financial institution and are keeping those accounts open, make sure to keep track of all of the account numbers and close the correct bank account — instead of one you intend to keep open.

Step 6: Get documentation.

After you’ve officially closed your bank account, request written confirmation of the account closure and details from the bank. Even if you receive a confirmation letter, it’s a good idea to call the bank and double-check. This way, you’ll be sure you didn’t miss anything.

Step 7: Review your final statement.

When you receive your last statement, don’t toss it in the trash. Closely review it to confirm there aren’t any unexpected or unfamiliar transactions. If something doesn't match up with your memory or records, contact your old bank to resolve the discrepancy immediately.

Two important questions, answered

You might be wondering, “Will closing a bank account hurt my credit score?” We all know that closing a credit card or loan can affect your credit score. But luckily, closing a bank account, like a checking or savings, has no impact on your credit whatsoever — as long as you don’t have a negative balance.

But what happens if you do have a negative balance? Negative balances most often occur when you forget to wrap up all the loose ends of account closure. If your old account has a negative balance and becomes a zombie account, you will need to pay it in full before the bank officially closes it.

You should pay any negative balances as soon as possible. That’s because a bank may report negative balances, which may impact your ability to open a bank account in the future and can show up on your credit report (and potentially hurt your credit score).

The good news is that once you’ve completed these seven steps, your bank account is officially closed and you’re free to move on with no strings attached. Breaking up with your bank can seem intimidating, but if you practice due diligence and care, you can move on to an account that’s better suited for your financial habits.

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