Closing a Savings Account - What You Should Know
Closing a savings account may be necessary if you need to move you money to another account or are changing banks. A savings account is a convenient tool, but it may happen that your relationship with the financial institution did not work out as expected. You may want to take your business some place else if this is your situation. Another reason reported by clients is that they want to open an online savings account as they are offered with better interest and higher yields. An online savings account may be a good place for an emergency fund, and it is relatively easy to access your money.
Things to Consider
Before you close your current account, however, there are a few things to consider, including automatic deposits and payments.
Have a look at your monthly statements, looking for automatic payments that may be going out of your account. If there are such, contact your vendors and retailers to arrange another way of payment. If you close the account without doing this, you may miss payments, and this will be reflected on your credit report, affecting your credit score. If there was a direct deposit set up, it won’t go through. What will happen is that your employer will be informed the account was closed, and you will be issued a live check. You may receive the money with some delay, so you may want to plan ahead. Your employer may either hand out the paycheck at work or mail it to your home address.
You probably know that many banks require depositors to keep a minimum balance. If you fail to do this, you can incur fees and penalties. Even if you are set on closing the account, with time passing between the funds’ withdrawal and the actual closing, the bank may assess fees. Now your savings account will be in overdrawn status, resulting in a lower credit score or being sent to collections. Pay the fees to prevent this from happening.
Things to Know
With these in mind, you can go ahead and close your savings account. Transfer or withdraw the remaining funds after determining if you are required to keep a minimum balance. Savings accounts cannot be closed if the account balance is negative. Note that different banks will vary in their requirements for closing a savings account. With some banks, you may have to visit the local branch to request closure. You will be asked to do this in order to verify your identity. Another question they may ask you is why you have decided to close it.
It is more common that the bank asks clients to request closing in writing. Make sure you specify where you would like any remaining funds to be sent and sign the request.
To make sure your account is closed, you can try to access the account through an ATM or log into online banking. You can do the first if you have a debit card issued. You will not be able to use your PIN number, password, and user name to access the account if it is closed. You should also receive a final bank statement showing that the account is closed, with your ending balance on it. Those who opted for receiving paperless statements will get this statement by email.
If you want to, you may open a savings account some place else – at a credit union or another bank. This will make it easier for you to maintain bill payments and maintain direct deposits. Another option is a checking account as it does not limit the number of withdrawals you make a month. Once you have your new account open, you can proceed by setting up recurring bill payments and establishing direct deposits in the same way you did with your other savings account. If you still hold a checking account in your old bank, you will be allowed to cash checks there as well.
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