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Closing a bank account isn't too difficult, but it's important to understand how to do it and why you should.
There are many reasons to close a bank account. You might be moving to another country, or you might have found better interest rates at another bank, or you might’ve aged out of the bank account your parents got you when you were a kid. Maybe you just don’t like your bank.
Closing a bank account is easy. If you have any recurring transactions, like life insurance premiums or mortgage payments, set those to your new bank account first. Do the same thing for your direct deposit.
Then, withdraw all the cash from the bank account you want to close, or transfer it over either electronically or by writing yourself a check. To close the account, call your bank, visit the bank in person, or write a letter to their offices. Your bank will have you sign an account closing form to make it official.
If you don’t withdraw the cash first, then your bank will send you a check when the account has closed.
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While closing a bank account (or credit union account) is easy, you should follow these steps to make sure it goes off without a hitch. Missing certain steps can result in fees or cause your salary to be delayed.
If you don’t make any deposits or withdrawals from your checking or savings account for a long time, the bank may consider the account inactive. You may need to reactivate the account before you can close it, which could require going to the branch location in person.
If your account has a negative balance, you may need to put the account back into the positive before you can close it. You may also need to pay off any legal claims attached to the account.
When a person dies, their loved ones may have a right to the funds in the deceased’s bank account. In some cases, the money is automatically transferred to a listed beneficiary on the account. If there is no beneficiary, then the money may have to go through probate, usually based on the terms of a last will and testament.
But if there is no will, the deceased’s loved ones may need to work directly with the bank or credit union to receive access to his or her checking and savings accounts.
The bank may also allow you to retitle the deceased’s bank accounts, essentially putting them in your name, instead of closing the account. Whether retitling the account or closing the account is right for you depends on your personal preference.
If the account holder created a payment-on-death (POD) designation — also called a transfer-on-death (TOD) designation — then one or more beneficiaries will be listed on the account. When the account holder dies, those beneficiaries will receive all the money in the account, even if other beneficiaries are listed in the will.
To claim payable-on-death funds from a deceased account holder’s bank, you need to provide proof of death (usually a death certificate) and sign an affidavit stating that you have the right to the funds.
If there is no POD or TOD beneficiary listed on the bank account, then funds will be distributed according to the terms of the deceased person’s last will and testament.
The estate’s executor will have to present proof of death to the bank, and the money in the account will become part of the estate’s assets, to be distributed to the beneficiaries listed in the will.
If the deceased person didn’t leave a last will and testament, then his or her loved ones may have to go to court to decide who gets the money in the deceased’s bank accounts. A court-appointed administer of the estate will distribute the cash along with the deceased’s other assets.
Save money and earn interest by opening a new savings account.
Your money can earn money just by sitting in a savings account. Policygenius has partnered with Fiona to get you great interest rates from some of the best online banks.
Some parents open checking and savings accounts for their children. This helps kids learn how to spend and save money. A parent remains the joint owner of the account, allowing him or her to make deposits and monitor the child’s funds.
But when you’re an adult, you’ll want your own bank account. You can close the account your parents opened for you by going the bank with the parent who co-owns the account. Both of you will need to fill out and sign an account closure form.
If you can’t transfer the money directly into your new bank account, your bank will write you a check. Make sure the check has only your name on it and not your parent’s.
If you have a joint bank account with your spouse (or ex-spouse) that you need to close, the process is similar to the above. You’ll need to show up to the bank or credit union’s branch location with the other co-owner and sign the account closure form.
But if the other co-owner can’t be located or refuses to cooperate, you may need to consult an attorney and take the matter to court.
It may be worth going through that extra effort to close the bank account because if it stays open, you could be liable for any legal claims against the account. If your ex-spouse owes money from a court judgment, the courts may come after that money from your joint account.
Having a savings account is half of the financial protection battle. Life insurance is the other half.
Your savings account can help you save money, but a life insurance policy will keep protecting your family when you're no longer around.
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