Does Closing A Bank Account Hurt Your Credit? (2024)

Ending a relationship with your bank is similar to ending any other type of relationship—there’s a right way to do it.

One of the most common questions people have is whether closing their bank account will hurt their credit score. The good news is that closing a bank account that’s in good standing won’t directly impact your credit. But if you don’t close a bank account properly, it can come back to bite you.

Does Closing a Bank Account Hurt Your Credit?

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.

However, having a negative balance when the account is closed could negatively impact your credit score.

When you overdraw a bank account, your bank or credit union may pay for the transaction and charge you a fee. If you don’t deposit enough to cover the transaction and the fee, your financial institution could send the outstanding balance to a third-party collection agency, which can then report your account to the three credit bureaus. If an account in collections is added to your credit report, it can drag down your score and stay on your report for up to seven years.

Your financial institution may also report your negative account balance to ChexSystems, which is a reporting agency that collects and reports data on how consumers manage their checking accounts. Some banks use ChexSystems reports to evaluate bank account applicants, so negative items like overdrafts could affect your eligibility to open new accounts.

How To Close Your Bank Account So Your Credit Isn’t Affected

Blemishes in your banking history could indirectly hurt your creditworthiness and make it challenging to qualify for loans in the future. Here’s how to safely close your bank account so your credit remains strong.

Open a New Bank Account

If you close your old bank account before looking for a replacement, you might find yourself in a bind if you need to write a check or pay a bill. To save yourself the headaches, get your ducks in a row by opening a new bank account before closing the old one.

Just be sure to research account features, like monthly service fees, ATM networks, branches near you, debit cards and customer service options so you can find the best checking account for your needs and avoid unnecessary fees.

Update Direct Deposits and Bill Payments

Once you’ve set up your new bank account, it’s time to reroute your direct deposits and recurring bill payments. Check with your employer to see which forms you need to fill out to send your paychecks to your new account.

Then link automatic payments, such as rent, car insurance and monthly subscriptions, to the new account. You can look through your old bank statements to make sure you catch them all.

Transfer Money to Your New Bank Account

After rerouting the automatic transactions and ensuring all payments have cleared for the month, move any funds from your old account to the new one.

If your old bank account has a minimum balance requirement, wait until you’re ready to close the account before moving money out. Otherwise, you could be charged a monthly maintenance fee.

Close Your Old Bank Account

Once you’ve completed all the steps above, you can move forward with the account cancellation. Some financial institutions allow you to cancel your account online, while others may require you to visit a local branch or submit a written request. If you’re unsure how your bank’s account closure process works, check its website for instructions or contact customer service directly.

The final step is requesting written confirmation from your bank to verify your account has been closed successfully. This can protect you if problems arise down the road.

Alternatives to Closing Your Bank Account

If your bank account has been inactive for an extended period, your bank is required by law to transfer the funds in your account to the state’s treasury department. For example, in California, bank accounts are considered dormant and will become unclaimed property after three years of zero activity. If you rarely use your bank account but don’t want it to become dormant, here are some options to consider:

• Use your debit card to make small purchases. Even if it’s just an occasional cup of coffee or a pack of gum, these small transactions can keep your bank account active.
• Sign up for auto payments. You can also set up automated payments for bills and subscriptions you already have—such as your phone bill or streaming service—to keep your account open. Remember to keep a close eye on your account balance to ensure you have sufficient funds to cover the charges.
• Withdraw or deposit cash. Another low-effort way to keep your bank account active is by occasionally withdrawing or depositing cash into the account. Try to stick to in-network ATMs because they’re usually free to use. If you use an out-of-network ATM, you may have to pay a fee to withdraw money.

Bottom Line

Closing your bank account with a negative balance could indirectly affect your credit score. If you need to close your bank account for any reason, follow the steps above to ensure you do it correctly and don’t leave a stain on your credit report.