If you have a savings account you’re no longer using, it’s important to close the account to avoid fees and other possible risks that could cost you money. Closing the account properly can prevent 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 easier 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 bank, or a different type of account 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 transactions. You may be able to increase your returns and reduce the cost of banking if you take time to evaluate the accounts and what they’re offering. For instance, a high-yield savings account with a higher annual percentage yield (APY) could pay considerably more than a standard savings account.
If you have multiple financial goals and needs, you may want multiple bank accounts for different purposes. For example, you might set up one account to save for your annual vacation or some other splurge, and dedicate another 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 savings transactions, such as payroll deposits, that flow through your savings account each month. Be sure to switch them over to your new account.
If you have any pre-authorized debits, you’ll want to update those as well. A failed automated payment or negative account balance could trigger penalties.
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.)
Since it can take some time for automatic payment processing information to update, wait until the new deposits are 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 need 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.
If you set up a new online bank account, you may be able to do an online transfer from your old account to the new one, which is typically quick and easy.
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Step 4: Monitor Your Old Account
After your funds clear into your new savings account, you can begin using it. However, you may want to keep your old savings account open for a couple of months as you transition to the new account, as long as it’s not costly to do so. This allows you to catch any automatic transactions you forgot to change over.
Step 5: Download Your Transaction Records
After you close 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, download your documentation before you officially deactivate your account.
Step 6: Close Your Old Account
Once you’re set up and using your new savings account, you can close the old one.
The exact process will depend on your bank — some may allow you to close savings accounts online or via a phone agent; others may not. 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 smart to get written confirmation of the account closure for your records. You should also review your final bank account statement for any errors.
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Common Reasons for Closing a Savings Account
Here are some common reasons for closing a savings account.
• 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.
• The bank has policies that don’t work for you, such as minimum balance and service fees.
• You have multiple savings accounts and want to consolidate.
• Another bank offers higher interest rates on savings accounts.
• You want to change from a brick-and-mortar bank to an online bank.
• You aren’t happy with your bank’s customer service 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, you should make sure to close it. This is important because then you’ll know exactly where your money is and which financial products you have open in your name.
Keeping only the savings accounts you’re actively using or plan to use can help you to simplify your finances, keep better track of your assets, and help you in your quest to achieve financial security.
Failing to close an old savings account could 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 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 old bank account, it can be more difficult to spot suspicious activity. If an unauthorized user accesses the account, they could 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 you don’t receive regularly — your yearly tax refund, for instance — you may forget you’ve done so. And if they one day make a deposit to a savings account you’re no longer using, 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 score.
If, however, your account has a negative balance, you will need to repay that at the time of closing the account.
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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 Checking and Savings® lets you earn a competitive APY with no minimum balances or account fees. That means your money can go farther.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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