How to Close a Savings Account

How to Close a Savings Account: Closing a bank account is a relatively fast procedure that can typically be completed through various methods such as online, at your nearby branch, over the phone, or by filling out a specific form. It is common to close a bank account when your banking requirements or financial circumstances undergo changes. There are instances where individuals may choose to close all their accounts and transfer them to a different bank. However, there are also situations where you may prefer to keep your existing relationship with the bank intact and solely close your savings account. To learn more about the process of closing a bank account, continue reading.

Here are some important points to remember:

• There are several reasons why you may decide to close your savings account, such as seeking a higher interest rate or avoiding fees.
• Closing a savings account is typically straightforward and involves transferring your money out of the account and notifying your bank about your intention to close it.
• Certain situations, like having an inactive account or the account owner passing away, can make the account closure process more challenging.
• Prior to closing your savings account, it’s essential to take a few necessary steps. These include updating your contact information, canceling any automated transactions associated with the account, downloading your bank statements for record-keeping purposes, and properly disposing of any remaining checkbooks or debit cards.

Why Close a Savings Account?

There are multiple reasons why you might choose to close your savings account. Sometimes, people close all of their accounts with a specific bank. However, in many cases, individuals prefer to close only their savings account while maintaining their relationship with the bank. Here are some common reasons for closing a savings account:

1. Seeking a better interest rate: You may want to close your savings account to find another bank or financial institution that offers a higher interest rate on savings.
2. Consolidating multiple accounts: If you have more than one savings account, closing one of them allows you to consolidate your funds into a single account, making it easier to manage your finances.
3. Switching to an online bank: Closing your savings account could be a step towards transitioning to an online bank that provides enhanced mobile banking features and convenience.
4. Avoiding fees: If your current bank charges fees on savings accounts, closing your account can help you avoid these fees and potentially save money.
5. Moving to a new bank: In some cases, you may decide to close your savings account because you’re switching to a different bank altogether, whether it’s due to better services, lower fees, or other reasons.

By considering these factors, you can determine if closing your savings account aligns with your financial goals and preferences.

Steps to Close a Savings Account

Closing a savings account is typically a straightforward process. Here are the steps you need to follow:

1. Open a new savings account: If you don’t already have another savings account to transfer your money into, it’s advisable to open a new one before closing your current account.
2. Transfer funds out of the account: Initiate a transfer from your current savings account to the new account or any existing account where you plan to move your money. Keep in mind that the time it takes for the transfer to complete may vary depending on the method you choose, and it could take several days to process.
3. Contact your bank: Reach out to your bank to inform them about your intention to close your savings account. Depending on the bank you use, you can visit a local branch, call their customer service, send a letter, or even close your account online.
4. Complete any necessary documents: Some banks may require you to submit specific documents, such as a letter or a form, to initiate the account closure process. For instance, Bank of America mandates a notarized letter for accounts with balances exceeding $25,000.

While the aforementioned steps generally suffice for closing an individual savings account, certain circumstances might necessitate additional measures or considerations.

Inactive Accounts

If your savings account has been inactive or dormant, meaning you haven’t used it for a year or more, closing it may be more challenging. Instead of being able to close the account directly, you will likely need to contact the bank to reactivate the account before proceeding with the closure.

In the event that you have had no transactions or activity with your account for a period of three to five years, it may be deemed abandoned or unclaimed. In such cases, the account could be closed, and any funds within it may be sent to your state’s unclaimed property program.

Overdrawn Accounts

In overdrawn account occurs when the balance of your account becomes negative due to either spending more money than you had or accumulating fees that brought the account balance below zero. Generally, it’s not possible to close an account that has an overdrawn balance. Instead, you will need to ensure that the balance is brought back to zero by either depositing enough funds or resolving the negative balance through other means. Once the balance is back to zero, you can proceed with closing the account if desired.

Deceased Owner Accounts

In order to close the bank account of a deceased person, it is necessary to establish your authority to do so. The process can vary depending on the circumstances:

If you are listed as a co-owner on the account, closing the account becomes easier. You can have the deceased owner’s name removed by presenting a death certificate as proof.

However, if there is no co-owner listed on the bank account, you will likely need to provide a death certificate. Additionally, you may require a legal document demonstrating that you are the designated executor of the estate, granting you the authority to close the account on behalf of the deceased individual.

In certain cases where the estate is not undergoing a formal probate process and does not necessitate an executor, specific states may accept a small-estate affidavit as an alternative form of documentation.

It is essential to consult with the bank directly to understand their specific requirements and procedures for closing a bank account of a deceased person, as the process may involve additional documentation or verification steps depending on the circumstances.

Joint Accounts

A joint account is an account that has multiple owners. The process of closing a joint account can vary depending on your bank and the method you choose for closure. Here are some scenarios to consider:

If you decide to close the joint account in person, the bank may require both account owners to be present. This means that both individuals will need to visit the bank together to initiate the account closure.

Alternatively, if you opt to close the account by mail, it’s possible that both account owners will be required to sign the closure letter. This ensures that both parties provide their consent to close the joint account.

However, there are situations where one account holder may have the ability to close the account without needing the consent or presence of the other account holder. The specific rules and requirements regarding sole closure of a joint account may vary depending on the bank and their policies.

To ensure a smooth closure process, it is advisable to directly communicate with your bank and inquire about their specific procedures and any documentation necessary for closing a joint account.

Custodial Accounts

A custodial account is established by an adult on behalf of a minor. The individual who opens the account acts as the custodian and maintains full control over the account until the beneficiary reaches the age of majority, which typically ranges from 18 to 25 years old depending on the state.

It’s important to note that once money is deposited into a custodial account, it becomes an irrevocable gift to the child. Withdrawal of funds and transferring them to your personal bank account is not permissible and could potentially lead to legal consequences. However, you do have the option to transfer the funds to a custodial account at a different financial institution. Moreover, if you are the beneficiary of such an account and have reached the age of majority, you are eligible to withdraw the money and close the account.

It’s crucial to understand that each financial institution has its own specific process for closing custodial accounts or transferring the funds. Therefore, it is necessary to contact your specific financial institution to initiate the necessary steps for closing or transferring the funds in the custodial account.

Tips for Closing a Savings Account

After closing your savings account, there are several additional steps that you should consider taking.

Destroy Checkbooks or Debit Cards

If you possess any checkbooks, debit cards, or ATM cards associated with the savings account you are closing, it is important to securely destroy them. While the likelihood of someone finding and misusing them may be low, destroying these items ensures that you won’t inadvertently attempt to write a check or use a card linked to an inactive account. By taking this precaution, you can prevent any potential confusion or unintended transactions.

Download Your Bank Statements

Before closing your account, it is advisable to download your previous bank statements as you may lose access to them once the account is closed. While some banks may retain statements for a certain period of time, it’s better to be proactive and have a copy of your statements on hand for future reference if needed. By downloading and saving your bank statements, you can ensure that you have a record of your financial transactions and can easily access them even after the account closure.

Update Your Contact Information

Even after closing your account, it remains essential to maintain updated contact information with the bank so that you can receive important documents such as tax forms. Before proceeding with the closure of your account, it is crucial to verify that your mailing address and other contact details are accurate and up-to-date. This ensures that the bank can reach out to you if necessary, allowing for the seamless delivery of any relevant documents or communication regarding your closed account.

Update Your Automated Transactions

If you have any automated transactions set up, such as direct deposits, scheduled transfers, or online bill payments, it is important to cancel them before closing your savings account.

The ideal outcome is that these automated transactions will simply not process once the account is closed. However, if you have direct deposits set up to go into the savings account, there may be a delay in receiving your paycheck if you don’t update your account information promptly. Similarly, if you use the savings account for bill payments, failing to cancel those automated transactions could result in late fees or missed payments.

To avoid any potential issues or fees, it is crucial to review and cancel all automated transactions associated with the savings account before closing it. This ensures that your financial obligations are properly addressed and prevents any unexpected complications that may arise from the closure of the account.

The Bottom Line

Closing a savings account is typically straightforward, but certain circumstances can add complexity to the process. Whether you’re transferring the account to secure a better interest rate, maintaining other accounts within the same bank, or transitioning all your accounts to a different bank, it’s important to have a well-thought-out plan for your funds.

Before closing your existing accounts, ensure that you have successfully transferred all your money to the new account. This step is crucial to prevent any potential loss or inconvenience. Take the time to verify that the transfer is complete and that all funds have been successfully moved to your desired destination. By doing so, you can confidently proceed with closing your existing accounts, knowing that your money is safely and securely in your new account.