Banks can and do close customer accounts for a variety of reasons. In general, when it comes to personal checking and savings accounts, there are three primary reasons why a bank may close your account:
- Excessive overdrafts/prolonged negative balance
- Suspicious or fraudulent activity
Additionally, there are very few laws and regulations that govern account closure; banks are legally permitted to close accounts for any reason, without notice. However, banks do often send written notice of account closure, and there may be ways to reopen your account or keep your bank from closing it in the first place. Below, we analyze the main reasons that banks close personal accounts and whether or not you can reopen the account in each case.
Closure Due to Inactivity
Banks will mark inactive bank accounts — those that have had no transactions for a long period of time — as dormant and eventually close them because they are expensive to maintain. Dormancy is slightly different from account closure in that a dormant account still exists; however, you cannot use it. Dormant accounts are closed to new transactions, internet banking, check requests, etc.
After an extended period of dormancy, banks will send the funds in your account (whether checking or savings) to the state government as unclaimed property. This can happen after there has been no activity in a dormant account for three to five years. If your bank sent the funds in your dormant account to the state, you can reclaim them by contacting your state treasury or unclaimed property office and submitting a claim.
Note that the amount of time you can keep an inactive bank account open varies according to state laws and the individual bank’s rules. Many banks will mark inactive accounts dormant after as little as six to 12 months of no activity, representatives from Chase Bank, KeyBank, and Wells Fargo said.
Many major U.S. banks do not charge fees for dormant accounts, but some will charge a fee for each month that an account is dormant (until the bank closes the account and sends its funds to the state). We researched each bank’s policies and contacted several branches to find out how much they charge for dormant accounts; the following banks charge monthly fees for dormant accounts:
- Citizens Bank: $10 a month after 12 months of inactivity
- Source: Customer service representatives
- Fifth Third Bank: $5 a month after 12 months of inactivity (checking) or 36 months of inactivity (savings); waived for accounts with balances over $2,500 or Express Banking accounts with balances over $100
- KeyBank: $5 a month after three months of inactivity for accounts with less than $5,000
- Santander Bank: $16 a month after 12 months of inactivity for accounts with less than $250
- Source: Santander customer service FAQs
- SunTrust Bank: $15 a month after 12 months of inactivity (Florida accounts only)
- Source: SunTrust consumer fee schedule
- U.S. Bank: $5 a month after 11 months of inactivity (checking) or 23 months of inactivity (savings)
- Source: Customer service representatives, U.S. Bank consumer pricing information
Conversely, the following banks do not charge a monthly fee for dormant accounts:
- Ally Bank
- Bank of America
- Capital One
- PNC Bank
- Regions Bank
- Wells Fargo
Reopening the Account
You can usually reopen an inactive account by making a transaction (deposit or withdrawal) within a certain period of time. Banks are required to contact you about an inactive account before reclassifying it as dormant. That notice will typically include specific information about how long you have to reactivate the account.
Once the bank classifies your account as dormant, you can still reopen it. To do this, you will typically need to submit a written request to your local branch. There are no fees for account reactivation.
Avoiding Account Closure
There are a few ways that you can keep your account from being closed due to inactivity and sent to the state government:
- Ensure regular account activity by setting up automatic transfers, payments, etc.
- Keep your contact information current so you don’t miss any notifications from your bank regarding your account.
- Contact your bank (even if you are not making a transaction) to let them know that the account is still active.
Closure Due to Excessive Overdrafts
When you make transactions and payments from your account that amount to more than the funds in the account, you will overdraw the account, meaning that it will have a negative balance. The length of time your account can be negative before the bank closes it will vary by bank and can be anywhere from 30 days to three months or more. You can usually find information about how long you can have a negative balance before your account is closed in your bank’s deposit account agreement.
Most banks will charge hefty overdraft fees, and some have limits on the number of overdraft transactions you can make in a period of time. Our previous research includes specific information about bank overdraft fees and policies.
Reopening the Account
Whether or not you can reopen a bank account that’s closed because of overdrafts depends on the specific bank’s policies, as well as the amount and frequency of the overdrafts.
In general, if your account is closed because the balance has been negative for too long, you can reopen it by paying the negative balance, which usually includes your transactions plus overdraft fees for each item that bounced. You can check your bank’s account agreement for specific information.
However, if your account is closed because of a high frequency or recurring pattern of overdrafts, you will likely be unable to reopen it. You will still have to pay off your negative balance and any associated fees. Note that your bank may report this type of account closure to ChexSystems account verification. This will make it difficult for you to open an account at another bank.
In some cases, the bank will allow you to open a savings account if your checking account has been closed due to excessive overdrafts. You may also be able to open a new checking account at an online-only bank, a bank that doesn’t use ChexSystems or offers second chance accounts, or a credit union that doesn’t use ChexSystems.
Avoiding Account Closure
Most banks offer some form of overdraft protection to help you ensure that a transaction doesn’t leave your account balance negative for too long. Typical forms of overdraft protection include the option to link a second checking account, savings account, credit card, or line of credit to cover a negative balance. For more information, see our explanation of how to use overdrafts and overdraft protection.
To avoid excessive overdrafts, you can track your spending and even sign up for text or email alerts from your bank to monitor transactions. You should also be aware of things like debit authorization holds that temporarily charge your account and can cause it to overdraft.
Closure Due to Suspicious or Fraudulent Activity
Banks will automatically close accounts (both checking and savings) that show obvious or proven fraudulent activity. However, they may also freeze or close an account that has suspicious activity or that they suspect of fraud.
The definition of suspicious activity varies by bank. Some types of activity that banks may consider suspicious or potentially fraudulent include:
- Multiple accounts under the same name
- Accounts opened in a different city or state than the accountholder’s reported residential and/or work address
- Large, frequent transactions for account holders with no employment record
- Unusual surges in account activity or deposit amounts
- Multiple deposits in round numbers (especially large deposits)
- Large amounts of money transferred to or from overseas accounts
- Cash deposits that are just under $10,000 (since any cash deposit that is $10,000 or more must be reported to the Internal Revenue Service)
Reopening the Account
If your bank closes your account due to suspicious or fraudulent activity, it will file a Suspicious Activity Report with the U.S. Department of the Treasury. If this happens, you will not be able to reopen the account, and it is unlikely that another bank will allow you to open an account.
However, since banks will notify you before closing your account, you may be able to resolve the situation before your account is closed. If you can prove that there was no fraud, or show legitimate sources for suspicious deposits, you may be able to keep your account. Note, however, that banks reserve the right to close accounts for any reason, and they may choose not to do business with you if your account is deemed a risk.
See our related research for more information on what you can do if your account is closed or frozen due to suspicious activity.
Avoiding Account Closure
As noted above, if you communicate with your bank before it closes your account, you may be able to resolve any suspicion regarding your transactions and banking activity. It is possible that the bank may freeze part or all of your account temporarily until any issues/investigations are resolved.
In general, it is a good practice to keep an open line of communication with your bank, especially if you think some of your banking activities may trigger a red flag. Avoiding the types of practices and transactions mentioned above can also help ensure that you keep your account in good standing.
While banks are permitted to close both checking and savings accounts for any reason, you can generally avoid this by keeping your account active and avoiding excessive overdrafts or potentially suspicious transactions. You can reactivate an inactive account by initiating new transactions, and if your account is closed for dormancy, you can typically reopen it by contacting your local bank branch. If your account is closed due to excessive overdrafts, you may be able to reopen it by bringing the account balance positive and paying any associated fees. You will likely be unable to reopen an account that was closed for suspicious activity, but you can work to avoid this type of closure by communicating with your bank and providing proof of legitimacy for any unusual transactions.