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In late afternoon chatter here at BlackEnterprise.com, the subject of closing bank accounts came up. While the idea or task seems easy enough to me –close the account and keep it moving — a few others in the office raised questions about automatic withdrawals on closed accounts and consumer reports that keep track of your banking. (Yes, there are consumer reports on that too.)
Let’s face it, bounced checks, account overdrafts, and poor account management can make severing ties with a bank more like a bad divorce instead of an amicable split. If you’re thinking about switching institutions or your bank is giving you the ax, here are a few key pieces of information you’ll need to know before making any financial decisions:
Give yourself a month. Before closing out your checking account, give yourself three to four weeks for any outstanding payments to clear, Greg McBride, senior financial analyst at Bankrate.com. Closing your account before payments clear can mean unpaid debt. Bill collectors can assess late payment fees to this outstanding debt which can potentially impact your credit score and your wallet.
Open your new account pronto. Consider opening your new account before closing out your old account. This way, it will be easier to transfer any recurring withdrawals to your new account without missing any bill payments. And if you have direct deposit, this will mean you’ll receive your paychecks without any problems.
Shop around. As with any other major purchase or decision, due diligence is required when choosing a new checking account. “Be mindful of the fees and balance requirements the account may have,” says McBride.Â “Make sure the account is a good fit for your financial lifestyle.” Bankrate.com offers a checking account search engine where you can compare account offerings.
Check your consumer health. Much like your credit report, there are consumer reports that that also track your financial history, including a banking report. The most widely used is from ChexSytems Inc., a reporting agency that tracks banking history. “The bank will access the ChexSystems database which details your history with previous bank accounts,” McBride says.Â If you’ve made a habit of overdrawing accounts in the past, or closed accounts while payments were still outstanding, this will show up on your consumer report, inhibiting your ability to open a new checking accounts, McBride says. For your free annual report visit ChexSystems’ Website or call 800-428-9623.
Dispute any inaccuracies. Much like your credit report, you can dispute any inaccuracies in your banking history. This is crucial because information stays on your report for five years. To report inaccuracies visit the Chex Systems Inc Website or call 800-262-777.
Renita Burns is the editorial assistant at BlackEnterprise.com.