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How to Close a Savings Account

November 16, 2020 · 6 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

How to Close a Savings Account

Some relationships don’t last forever, and for a variety of reasons, your banking may be one of them. Regardless of why you want to close a savings account, making sure to do it right can save you hassles and ensure that your finances continue to flow smoothly.

Here’s what you need to know about how to close a savings account.

How to Close a Savings Account in Six Steps

Closing a savings account is generally fairly simple, but the more organized you are, the less of a hassle it will be. Here’s what you need to do.

Step 1: Decide Where You Want to Keep Your Money

Before you end one banking relationship, it’s good to have another place lined up to stash your money. This may mean a new account with a new financial outfit, or a different savings product at your existing financial institution.

Your monetary goals can help guide you in this decision. For example, different types of accounts earn different interest rates and charge different fees for various types and frequencies of transactions. You may be able to increase your returns and reduce the cost of banking if you take time to evaluate the accounts on offer with an eye toward how you plan to use your account.

If you have multiple financial goals and needs, you may also find that it makes sense to have different accounts for different purposes or to select an account that makes it easy to organize your savings.

For example, you might set up one account to save for your annual vacation or some other splurge and dedicate a different account to put away money for an emergency.

Step 2: Update Any Automated Transactions

Though automatic bill payments are more commonly made from checking accounts, you may have some automated transactions, such as payroll deposits, that flow through your savings account each month.

If you have any pre authorized debits, you’ll want to update those as well, as a failed automated payment or negative account balance may trigger various penalties.

Before you close your old account, you’ll want to make sure all such automated transactions are now processed through your new account.

The best way to ensure you don’t forget to make any updates is to review several months’ worth of bank statements. (Because some deposits, such as income tax refunds, may occur on an annual basis, you may even want to review a full year of account records.)

Once you have identified any automated transactions, you’ll need to provide your new deposit details to the party that pays you.

Because it can take some time for automatic payment processing information to update, you’ll want to ensure that the new deposits have been successfully set up before you close your old account.

Step 3: Move Your Money

Once you have your new savings account set up, you’ll want to move your bank balance. The amount of money in your old account will play a role in determining the easiest and most secure way of doing so, as will the features of your old savings account.
You may be able to do an online transfer or have your old bank issue a money order, which you can deposit into your new account.

Step 4: Monitor Your Old Account

After your funds clear into your new savings account, you can begin using it. But if it is not too costly to do so, you may want to keep your old savings account open for a couple of months as you transition to the new account.

This allows you to catch any automatic transactions you forgot to change over and provides additional time for any lags in updating your new account details.

Step 5: Download Your Transaction Records

After you’ve closed your account, you’ll typically lose access to your transaction history. If you require any records of your banking activities under the old account, or interest earned, don’t forget to download your documentation before you officially deactivate your account.

Step 6: Close Your Old Account

Once you’re set up and are comfortably using your new savings account, you’ll want to close the old one.

The exact process for doing so will depend on your bank—some may allow you to close savings accounts online or via a phone agent; others may require notice in person or in writing. If you still have money left in your account, you’ll receive that sum minus any outstanding bank fees owed.

Because closed bank accounts can sometimes be reactivated in error and incur fees, it’s wise to get written confirmation of the account closure for your records. You should also review your final bank account statement for any errors.

Common Reasons for Closing a Savings Account

For most Americans, banks are a vital utility: Paychecks and bill payments flow through bank accounts, and they’re where many choose to keep savings for the future. Most people are happy with their banks.

According to the American Bankers Association , 88% of Americans say they are “satisfied” or “very satisfied” with their primary bank, and 96% and 93%, respectively, speak favorably of their bank’s customer service and access to banking services.

That doesn’t mean circumstances won’t arise that make it appealing, practical, or even necessary to close a savings account. Here are some common reasons for a change in banking at some point.

•   You’re moving, and your existing bank doesn’t have branches and ATMs near your new location.
•   Your bank’s hours don’t suit your lifestyle.
•   Banking policies such as minimum balances and service fees do not fit your needs.
•   You have multiple savings accounts and want to consolidate.
•   Another place offers higher interest rates on savings accounts.
•   You want to change from a brick-and-mortar bank to an online entity.
•   You aren’t happy with your bank’s customer service, online features, or some other aspect of banking.

Why It’s Important to Close a Savings Account Properly

Once you’ve decided to switch financial services or open a new savings account, it’s a good idea to go through all of the steps involved in closing your old savings account properly.

While there are times when it may make sense to have multiple bank accounts, if you’re not using your old savings account at all, you should make sure to close it.

Why is this important? It’s always a good idea to know exactly where your money is and which financial products you have open in your name.

Keeping only the savings accounts you are actively using or plan to use can help you to simplify your finances and keep a better track of your assets. Keeping a savings account you’re not using can also potentially cost you money because of the following risks.

Dormancy fees and other penalties:

Some banks charge account holders a “dormancy fee” after a period of time without any deposits or withdrawals. These fees can accumulate month over month.

Some banks also waive fees for account holders whose balance stays above a minimum threshold—but reinstate the fees if the funds in the account go below that amount. If you do have a balance in your unused savings account, these penalties can deplete it.

Fraud:

If you’re not closely monitoring your bank account, it can be more difficult to spot suspicious activity and signs of fraud. If you still have money in your savings account, you may not notice that those funds have been withdrawn. If hackers are able to access your account, they could also use it to acquire new banking products, such as a credit card, in your name.

Lost deposits:

If you’ve signed up for direct deposit in the past from a party that does not pay you regularly, you may forget you’ve done so. And if they one day make a deposit to a savings account you’re no longer using and are not paying attention to, you may not notice you received that payment.

While there are drawbacks to keeping an unused account open, you may also be wondering: Is it bad to close a savings account? The good news is, closing your account usually comes at no cost. Not only do most banks not charge a fee to close a basic savings account, but doing so will not affect your credit rating. If, however, your account has a negative balance, you will need to repay that at the time of closing.

Finding an Account That Meets Your Needs

Even if you’ve been with the same bank forever, it’s worth taking a pulse check from time to time to ensure that your savings account meets your financial needs and is helping you get closer to achieving your goals.

Whether one financial goal or several are in play, SoFi Money® is a cash management account that allows members to earn cash back while saving and to earmark savings in dedicated vaults for goals, emergencies, or any other particular purpose.

Name them (Europe Vaca or New Car or Gadgets) and track your progress every time you log in to the app.

Learn more about SoFi Money today.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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