I wanted to put together a list of the top 5 reasons why your bank may close your account. This is not scientific but rather from my past experience in the banking industry.
First you must understand that when you enter into a contract with a bank and open a transaction account, exmp. checking, savings or money market, you have given the bank the right to close out your account at any time with or without reason.
Let’s first go over the possible ramifications of the bank closing out your account and what it can lead to.
The problem with your bank wanting to close your checking or savings account is that you may be reported negatively on something called ChexSystems.
A brief description of what ChexSystems is.
ChexSystems is considered a consumer reporting agency that is governed under the FCRA (Fair Credit Reporting Act) and is used by most financial institutions to determine worthiness to open or keeping an account.
Each financial institution uses ChexSystems a little different from one another and some rules for use vary from state to state.
ChexSystems is a scoring system where the higher the score the better you look. If reported negatively, you will have issues opening or maintaining a checking or savings account at most banks.
Reporting to ChexSystems is done when a financial institution has either an unsettled balance, considers your account to have excessive overdrafts, fraud caused by you has taken place, the knowing or unknowing deposit of fraudulent checks, check kiting or any suspicious handling of your accounts. Reporting of unsettled balances usually happens when amount owed is over $100. This is amount generally excludes bank fees and the reportable amount is higher for some financial institutions.
Let’s say Bank A reports you and you also have an account at Bank B. When Bank B discovers you’ve been reported by Bank A, they may choose to close your accounts as well based on what information is on file.
Banks will periodically run ChexSystems on existing customers to see if any other institution has reported them. If you are unfortunate enough to have been reported to ChexSystems, you may be on file for a period up to five years. You can dispute the reporting and possibly get your negative record removed. You may also increase your chances of a better ChexSystems score by paying off any amount owed. This will not necessarily remove the reporting but may lead to other institutions allowing you access for opening a new account.
If you have been declined for a checking or savings account go to www.consumerdebit.com and get a free copy of your ChexSystems report.
Remember that banks are not in the business of closing accounts. The costs of acquiring new customers out ways their desire to punish you. So if the bank does close your accounts, it’s most likely for one of the reasons below.
With that said, here the top five reasons based on my experience as to why your bank will close your accounts.
Overdrawn account or consistently overdrawing your account. This is an obvious one and happens often. If your account is overdrawn for a specific time frame, usually anywhere from 45-60 consecutive days, the bank will close your account and possibly report you to ChexSystems based on balance owed. Same goes if you your account is always overdrawn. Although your account overdraws but yet you always make whole on your balance you still pose a risk of potential loss to the bank. This can cause them to close your account. Many customers live with the continuous overdraft fees not knowing someday this will catch up to them. Don’t give the bank your hard earned money with these ridiculous fees.
Structuring your transactions to avoid reporting. This happens often and something you should stay away from. I recommend reading this blog I posted a few weeks ago for more clarification. https://steemit.com/money/@silverbug2000/what-your-bank-is-not-telling-you-about-your-cash-deposits-and-withdrawals This could lead to ChexSystems reporting.
Too many fraud disputes filed on your account. This happens often!! Disputes can be from anything including debit card purchases, check writing, or any form of deposits and withdrawals. When you have a legit dispute, file it. The problems with disputes are many customers will use the bank to get reimbursed when in actuality the transaction was valid. Perfect example is when an account holder enrolls for an online or gym membership only to cancel but yet not follow proper process and expect the bank to act as their paralegal. Excessive disputes can trigger a closure of your relationship. Too many disputes will put the bank at more risk than desired. Only file disputes on actual fraud. This can lead to ChexSystems reporting.
The innocent bystander linked to someone else’s account. Great example is when a friend or family member is helping out a loved one with financial problems. If you have a joint account with someone with issues and that account has some activity undesired by the bank, then both of you may be hit with the closure of all accounts. Keep that in mind before helping your uncle that was just released from prison. This can lead to ChexSystems reporting.
Verbal abuse or taunting of other customers or branch employees. This does happen on occasion. You have to remember financial institutions are for profit corporations. They can and will close your account for excessive bad behavior. If you go to your local branch looking for a heated confrontation or videotaping the event, that will most likely lead to the end of your relationship. This one here will not be a ChexSystem reporting event. Atleast to my knowledge it’s not.
Another possibility I didn’t mention was the kiting of checks. This is happening less and less due to new technology and the speed of processing transactions. Today most banks have technology that alerts the system that the check in question has the potential to be returned based on past experience with the account.. So what is kiting? Basically kiting is writing checks on an account from one institution and depositing the funds in another institution while said check has insufficient funds only to repeat the process with the other institution. This creates a vicious cycle of “playing the float time” and generally one bank gets left holding the loss. This can lead to ChexSystems reporting but again it’s becoming less likely in today’s world.
Thanks for reading.