Is it bad to open and close bank accounts

Dear Dr. Don,
I have several savings accounts with different banks. The oldest savings account was established six years ago, and the most recent was opened two years ago. I am planning to close them all and move the money into a money market account paying at least 0.9 percent interest. My concern is whether this is a great decision. Would it hurt my credit score if I close all my savings accounts?

Thanks,
— Garry Gains

Dear Garry,
Well I certainly wouldn’t consider you a “hot money” type jumping around for high returns, even though you are chasing yield by consolidating your savings accounts into a new account paying a higher interest rate.

Your concerns should be with both your credit score and your consumer banking report. Sometimes a bank will do a “hard pull” on your credit report when you open an account. It shows up as a credit inquiry on your credit report, even though you haven’t applied for a loan. This credit inquiry can influence your credit score because it stays on your credit report for two years, and it impacts your credit score for that first year. That said, the impact should be minimal and shouldn’t drive your decision to consolidate your bank accounts.

On its frequently asked questions Web page, the bank offering the money market account you’re considering states that your credit score will never be affected. That means they’re doing a “soft pull” on your credit report. A soft pull is just a review of your credit report information without indicating you’re applying for credit.

Your consumer banking report, also known as your ChexSystems report, lists your banking relationships and whether you’ve had any issues in your accounts, such as a bounced check. Negative information stays on your ChexSystems report for five years. Closed savings accounts will show up on your report but won’t influence your credit score.

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There are many ways to go about your personal finance and business finance. Sometimes your finances include needing to learn how to close a bank account.

Maybe you want to set up an account somewhere else. Maybe you want to close the account because overdraft fees are too high.

Whatever the reason, we're here to help you figure out how to close a bank account in 5 simple steps. 

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How to Close a Bank Account

When learning how to close a bank account, it's important to know what you need to get done before closing the account.

Follow the next 5 steps to not only learn how to close a bank account, but how to prepare to close a bank account. 

Step 1: Stop automatic payments

If you have any automatic payments set up, you'll want to stop all of those before closing the account.

You might have automatic payments set up for recurring payments like credit card payments or bill payments. 

Step 2: Clear all your charges and pending payments

If you have any charges or pending payments, you'll need to pay those or wait for the payments to go through before you close your account.

You'll also want to make sure all those payments process completely before you close the account. 

Step 3: Download documents

Download any important documents for your personal files.

Download files like credit reports, joint account forms, bank statements, account closure forms, and any other account information. 

Step 4: Transfer money

Now that you've taken care of all the business affiliated with your account, you're ready to transfer money.

You might want to transfer money into a new joint account or a new financial institution.

Step 5: Close the account

After you transfer money, it's time to close the account.

You can close the account in person, over the phone, by mail, or online, but every bank is different. 

Talk to your bank to know for sure what their process for account closure might be.

Don't forget to get a confirmation of the account closure afterwards. 

Can You Close a Bank Account Online?

Can you close a bank account online?

If you don't want to visit a bank location, you might be wondering, can I close a bank account online?

This may depend on the bank. Many financial institutions allow account holders to close a bank account online, but some require the account holder to come in person, or in the very least, call customer service directly. 

So can I close a bank account online? The answer is, it depends on your bank. 

Many banks will at least let account holders start the account closure process online.

If you can find an account closure request form online, then start the process. But it never hurts to call customer service or visit your nearby branch as well. 

Does Closing a Bank Account Hurt Your Credit?

Does closing a bank account hurt your credit?

Closing a credit card account can have an impact on your credit score but closing a debit card account generally does not.

So, if your bank account includes a credit card account, this could affect your credit score. 

Avoid negative effects on your credit score by paying off any negative balances, fees, or credit card amounts before closing a bank account. 

5 Reasons to Close a Bank Account

Even if you don't want to leave the banking system entirely, there are still many reasons some can have for closing a bank account. 

1. Poor Customer Service

When you're using a financial institution, you are trusting them with your personal finances. The least you can expect is great customer service.

By closing a bank account and moving to a new bank, or by using alternative financial services like Check City's Check Cashing Services, you can find the personal, warm customer service you deserve. 

2. Becoming Unbanked

Some people choose to be what's called "unbanked." This means that you choose to not have a bank account.

Some people choose to be unbanked to avoid bank fees or because they prefer alternative financial institutions.

If you decide to become unbanked, then you may need to learn how to close a bank account. 

3. Bank Availability

If you are moving or travel very often, you might need to learn how to close a bank account so you can open a more travel-friendly bank account.

Some banks are available nationwide while others are only available in a few states. Some banks are also available internationally while others are only available in the US.

If you travel a lot, or if you're moving, you may need to close your bank account and start anew with a bank that has better availability for your needs. 

4. Requirements and Fees

Another reason to learn how to close a bank account is to avoid bank account requirements and fees.

Some bank accounts will have minimum balance requirements, overdraft fees, fees to transfer money, or fees for negative balances.

If the bank statements start including too many fees, it might be time to think about account closure.

5. Switching Banks

Sometimes you want to close your bank account to start an account somewhere else instead.

Debit card accounts and credit card accounts all come with their terms and conditions at each bank.

Banks all come with their own pros and cons. If you want to switch bank accounts, then you need to learn how to close a bank account, so you can open one somewhere else. 

In Conclusion, 

There are many valid reasons for closing a bank account.

Whether you are leaving the banking system in favor of alternative financial services, or merely switching banks, you can use these tips to make the transition smoother. 

Does closing an account hurt your credit?

Can you open and close a bank account the same day?