Compare Early Account Closure Fees at the Top U.S. Banks
If you have to close a bank account, you’re probably wondering about the process and how to do it to in order to avoid fees.
Some banks and bank accounts have “early account closure” fees attached to them if you don’t keep them open for a certain amount of time.
If you are not sure what could happen when you close a checking or savings account before your bank terms stipulate it’s okay to do so, find out about the consequences of closing a bank account early.
Why Would You Close a Bank Account?
There are plenty of legitimate reasons for having to close a bank account such as moving, avoiding monthly fees, or wanting to do business with another bank.
You have the free will to move your money about as you please, but you should be aware of what could happen when you need to close a bank account early.
What Could Happen If You Close My Bank Account Early?
If you want to close a bank account, you should be aware of a potential early account closure fee.
Banks have the right to charge you an “early account closure” fee if you close your account before you satisfy the requirement to keep your account open for 60, 90, 180 days or more.
Early Account Closure Fees at Top U.S. Banks
|Bank||Early account closure fee||Terms|
|BB&T||$24||Within 90 days of opening|
|Bank of America||$0||N/A|
|M&T Bank||$50||Within 180 days of opening|
|Regions Bank||$25||Within 180 days of opening|
|KeyBank||$25||Within 180 days of opening|
|U.S. Bank||$25||Within 180 days of opening|
|PNC Bank||$25||Within 120 days of opening|
|TD Bank||$0||Account balance may have to be $0 before you can close|
|SunTrust||$25||Within 180 days of opening|
|Fifth Third Bank||$0||N/A|
|Santander||$25||Within 90 days of opening|
Other financial considerations include any instances when your bank account is being used for payment.
If your checking account is closed and you still have its information for paying a bill, for example, the biller could charge you with returned payment fees and/or late fees.
Why Banks Charge the Early Account Closure Fee
You might wonder, “Why are these bank fees necessary?”
Though it seems like banks earn enough money as it is, from a business perspective, it can make sense for banks to charge this fee.
Costs to the bank
Think about the last time you opened up a new account with the bank.
You probably had to sit down with a personal banker while they collected all of your personal information, gave you forms to complete, and took the time to explain all the rules terms and services while printing out paperwork to finalize the account setup.
Then, it's likely that they took your deposit and personally walked it over to the teller window to deposit it.
All in all, the entire process might have taken an hour or more. If the bank is especially busy, it could take even longer.
Thinking about what it took to pay that personal banker, the teller to process the initial deposit transaction, and the paperwork, it's quite possible that banks may even be undercharging for early account closure fees.
Now, we all know that banking is an extremely profitable business. So, in reality, the expenses banks incur for new clients are probably paid back multiple times when they acquire a new, long-term client.
The problem comes when banking customers are not around long-term.
To lessen the sting of losing money on these services, the early account closure fees make sense. They are in place to discourage consumers from leaving.
Attract new customers who stick around
Banks want to bring in new customers who will stay with them for a long time -- increasing the likelihood of making more money off them.
Customers help produce profit through fees and deposits (lent to borrowers who pay interest on loans).
Many banks use account-opening bonuses to attract these new customers. And, some consumers may come up with the clever idea to open a bank account just to secure a cash bonus. Then, they leave not long after.
The bank's original investment to bring you in as a customer did not generate a return for the bank. They lost a depositor, which costs marketing dollars to get and administrative fees to get set up.
Before opening a new account that offers a cash bonus (and even for those that don't), you should become aware of rules and fees that could affect you as an account holder.
For example, with many accounts that offer cash bonuses or “no fee” checking services, you'll probably have to have direct deposits, perhaps from a paycheck, on a consistent basis going to the account.
This is an example of a requirement that could be deterrent for those who open bank accounts just for cash bonuses, as redirecting direct deposits can be a hassle for the broad majority of people.
In addition to direct deposit requirements, other examples of bank requirements for new accounts might include:
- Making a certain amount of transactions in a given time period
- Paying a monthly account service fee
- Maintaining a minimum balance for a given period of time
- Keeping your account open for a certain period of time
Also, you should know that new account cash bonuses are considered, by the IRS as earned interest. So those bank bonuses are taxable income.
With this in mind, you may actually find out that you're better off keeping your money in high yield savings accounts.
Plus, you avoid the potential to rack up service fees and early account closure fees.
What's more, is if you don't fulfill the amount of time you need to “park” your money in an account, your bonus could also be “clawed back.”
A clawback is when you must return a bonus or reward given to you for meeting bank requirements.
For all the hassle and changes you'll have to go through to keep thousands or maybe even tens of thousands of dollars tied up in your account for relatively small cash bonuses, you may find that you’re not using your time or money in the most effective manner.
However, if you do insist on this activity, you should know exactly what you're getting into along with the fees a bank will charge you for closing your account early.
How to Avoid the Early Account Closure Fee
In order to avoid these fees, make sure you understand bank terms of service when it comes to closing accounts.
Most banks, especially those that offer cash bonuses for new accounts, require account holders to keep their account open for a certain period time to get the cash bonus and avoid early account closure fees.
The obvious way to avoid the early account closure fee would be not to close your account early.
If there are circumstances that force you to close your account prematurely, you could reconsider the decision and wait to close your account.
If this is not an option, you could always present your case to the bank to get the early account closure fee waived.
For instance, if you are getting married and merging bank accounts, you could present a marriage license. If you are moving unexpectedly to an area where the bank has no presence, present documentation to support that as well.
If you run into a cash crunch and find yourself having to close or withdraw your monies from a new account, early, you could talk with a personal banker or the bank's customer service line to request that service fees and early account closure fees be waived.
When You Open & Close Too Many Accounts
When you open and close too many bank accounts in a short period time, your behavior can be tracked by a consumer report agency called ChexSystems.
ChexSystems is like a credit report, but it usually only deals with banking and check-writing information.
If you are in the habit of opening and closing multiple checking and savings accounts, banks can find out.
Your ChexSystems record may show it and banks could deny your application for new bank accounts because they fear that you'll just close the account after a couple months.
At the end of the day, closing an account before it is “seasoned,” is part of financial life, whether intentional or not.
Though there are potentially more benefits to being a long-term customer with a bank, in some cases, it’s simply not possible.
Just be aware of the procedures and related fees you could face when you need to close a bank account earlier than planned.