Banks have the right to open and close accounts at their discretion. And, if your banking institution determines that you are a high-risk account holder, then you will likely have that account closed. When an account has been closed by a bank, the process of getting it reinstated will depend on the reason for termination, as well as the bank's policies.
Reasons for Closing Checking Accounts
Banks can close checking accounts for a wide range of reasons, including a history of bounced checks, a negative balance left unpaid, association with high risk industries, or a simple lack of activity. In states that don't require banks to provide written notice in advance of a pending account termination, a customer may not find out that an account has been closed until a purchase on a debit card is declined, checks start bouncing or online access to the account is denied.
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Generally speaking, accounts closed due to the bank's concerns regarding financial risk face more challenges for reopening than accounts that have simply gone dormant or carry a negligible balance for an extended period.
Reinstating a Troubled Account
The steps to reinstate a troubled account should be taken as quickly as possible, as banks generally have 60 days before being required by federal regulations to charge off the debt. The first step to take after finding out an account has been closed is to call the bank to find the reason for the closure and how it may be rectified.
Banks set their own policies regarding the reinstatement of closed accounts, but getting an account that was closed due to a negative balance will likely a require a deposit large enough to cover the debt. As an alternative solution, a bank with a policy that doesn't allow the reopening of accounts may allow the opening of a new account after the debt is paid.
Reopening a Dormant Account
An account closed after going dormant may be re-opened if an electronic payment or deposit is submitted within a specified amount of time. Commerce Bank is one such bank that will reopen a checking account if an incoming deposit is transmitted to the closed account within a certain amount of time. While Fidelity Bank and Trust will close a business account that carries a zero balance for 30 consecutive days. Although, an account closed for this reason can be reopened at the customer's request if accompanied by a deposit.
However, Citizens Bank, will move a dormant account from closed status, to terminated status when the account carries a zero balance for 61 days. Because terms vary greatly, it is best to read your bank's disclosures and agreements carefully, or contact your bank directly for clarification.
Keeping Your Bank Record Clean
Once you have reinstated your account, ask your bank representative if the institution will be filing a report with ChexSystems, a service that maintains data on problematic bank account histories of individuals and businesses. ChexSystems keeps negative reports on the books for five years, which may make it difficult to open future bank accounts.
Banks and credit unions report to ChexSystems on a voluntary basis, so a filing a may be avoided if you make that request. If the bank has already filed a report, ask it to update the record to show that the account has been paid in full.