So you go to use your debit card to make a purchase or withdraw cash, or you try to pay a bill from your checking account, only to find out that your card has been declined, your transaction denied, and your access to your money cut off. The New York Times recently reported that banks are increasingly closing customer accounts without warning or authorization—and for no apparent reason. They’re not even required to notify you if this happens, which means some people find out only when they can’t use their cards or withdraw funds. While suspicious activity and fraud are considered one possible explanation, there’s also no data source to confirm exactly how many accounts are being shut down and why.
How to protect your bank account from closure
The Times reporting suggests several possible scenarios that would raise red flags for a bank’s fraud department. One is related to how much you deposit and withdraw, and in what pattern. Under federal law, customers have to fill out a form for any transaction of more than $10,000, and choosing to reduce the amount rather than complete said paperwork is likely to be suspicious. Similarly, large cash deposits at ATMs or a series of high-value deposits and withdrawals in a short period of time may also be tagged as fraudulent. While this may be innocuous—you work in an industry that has cash tips, for example—the bank doesn’t see it that way.
Banks may also tag accounts for closure when there’s no activity for a period of time, or when there are frequent negative balances or overdrafts. Using checks can also put you on a bank’s radar due to the increase in check fraud in recent years, as can violating account terms and conditions (such as using a personal account for business purposes).
Given these possibilities, there are a few things you can do to head off account closure:
Overcommunicate with your bank. If you are making uncharacteristic deposits or withdrawals, moving large sums of money around, or going through any major financial transition (such as a move, a home purchase or renovations, or extended travel), give your bank a heads-up.
Check all bank messages. Don’t toss notices without opening them, and look into all messages you receive. Note that you shouldn’t respond uncritically to texts, calls, or emails, which may themselves be fraudulent. But if you are contacted by anyone claiming to be from your bank, call the number or send a secure message on the website or your client portal to make sure you don’t miss anything important.
Monitor your account activity. Set up transaction and low balance alerts, and check statements, deposits, and withdrawals regularly.
Limit your check usage. If possible, stop sending checks in the mail to reduce the risk of washing, or at least take steps to protect your checks from fraud.
What to do if your account shuts down unexpectedly
If you take precautions and your bank closes your account anyway, contact them ASAP and ask what steps you need to take to get access to your money. If your bank has a local branch, it may be effective to go in person. Communicate calmly but firmly. In some cases, such as a dormant account, you may need to go to your state’s unclaimed property office to obtain your funds.
Next, make sure you halt direct deposits and automatic withdrawals (such as bill pay) and switch these transactions to a different account that you can still access. If the bank will allow it, try to reopen the account or ask about other options, after which you can also consider switching to a different bank.
Finally, you can file a complaint with the federal Office of the Comptroller of the Currency if you believe your account has been closed without cause.
