Closing a bank account typically won't hurt your credit. Your credit score is based on how you manage borrowed money, and your checking or savings accounts aren't debts. So bank account closures aren't reported to the three major credit bureaus: Experian, TransUnion and Equifax.
Closing an account may save you money in annual fees, or reduce the risk of fraud on those accounts, but closing the wrong accounts could actually harm your credit score. Check your credit reports online to see your account status before you close accounts to help your credit score.
Closed accounts that have missed payments associated with them will remain on your credit report for seven years. While your scores may decrease initially after closing a credit card, they typically rebound in a few months if you continue to make your payments on time.
Closing a bank account doesn't affect your credit score or history. Although financial institutions report account closures to ChexSystems, opting to close a bank account doesn't impact your ChexSystems report.
If you close an account that does not offer credit, such as a savings account with a debit card, it will not affect your credit score. All you need to do is to ensure that you transfer your remaining balance and divert any direct debits, and even with a closed account, your credit score should remain unaffected.
Similarly, if you pay off a credit card debt and close the account entirely, your scores could drop. This is because your total available credit is lowered when you close a line of credit, which could result in a higher credit utilization ratio.
If the account has annual fees or high interest rates, it may be worth closing it to save money in the long run. But if it's an account that you've had for a long time and it's done well for your credit history, it might be better to keep it open.
Close the Account and Request a Written Letter
You may need to visit the bank in person, call a customer service phone number or submit your request in writing. If you didn't already move your money out, you will receive the balances in your accounts in the form of a check.
Having two or more current accounts won't necessarily damage your credit score, but it could have a negative impact if you start dipping into multiple overdrafts – making it look as if your finances are becoming stretched.
Closing a credit card with a zero balance may increase your credit utilization ratio and potentially drop your credit score. In certain scenarios, it may make sense to keep open a credit card with no balance.
An account that was in good standing with a history of on-time payments when you closed it will stay on your credit report for up to 10 years. This generally helps your credit score. Accounts with adverse information may stay on your credit report for up to seven years.
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
You should have at least two savings accounts: an emergency fund and an account to save for big purchases. Your emergency fund should have enough to cover at least three to six months' worth of living expenses. Your other savings account is where you put cash to cover specific purchases you plan to make in the future.
Closing a bank account is a straightforward process, but it can take an unexpectedly long time if you aren't prepared. Depending on a few different factors, the process can take a day, a week, or even a few months. In most cases, closing a bank account can be finalized in one or two days.
Your bank account information doesn't show up on your credit report, nor does it impact your credit score. Yet lenders use information about your checking, savings and assets to determine whether you have the capacity to take on more debt.
As a short-term investment strategy, having multiple accounts can help you build up your savings faster. It's also useful to have short-term savings in a high-yielding account, while you might have long-term savings such as a retirement fund in a CD or IRA account that isn't earning as much interest.
You usually can't reopen a closed account, but you'll still be able to open a new one.
Contact your bank to close your account
You can usually close your account online through internet or mobile banking, or by calling your bank or visiting your local branch. It's worth checking the specific requirements with your bank. For example, some banks ask you to return any unused cheque books or cards.
Closing a bank account online is simple and convenient.
And if you've moved, it might not be possible to visit a local branch to close your old account. The answer is yes, some banks let their customers close their bank accounts online. But you'll need to get a few things in order first. Here's how to do it.
A short credit history gives less to base a judgment on about how you manage your credit, and can cause your credit score to be lower. A combination of these and other issues can add up to high credit risk and poor credit scores even when all of your payments have been on time.
Why credit scores can drop after paying off a loan. Credit scores are calculated using a specific formula and indicate how likely you are to pay back a loan on time. But while paying off debt is a good thing, it may lower your credit score if it changes your credit mix, credit utilization or average account age.
This content is created independently from TIME's editorial staff. Learn more. American households, on average, have $41,600 in savings, according to data last collected by the Federal Reserve in 2019. The median balance for American households is $5,300, according to the same data.
Maximum Account Balance Limits
The FDIC insures bank accounts in the very rare event of a bank failure. As of 2022, the FDIC coverage limit is $250,000 per depositor, per account ownership type, per financial institution.