Should you close your foreign bank account?
Considering closing your foreign bank account? Discover the tax implications, benefits, and steps involved in making this decision. Learn more here.
There are plenty of reasons why you might need to close a bank account. Maybe you’re graduating and it’s time to move on from a student account. Maybe you’ve found a bank with account perks and fees that work better for you, so you’re switching and need to close your old account. Or maybe you’re moving to a new country, and you need to close your account in the US.
Closing a bank account may seem like an easy process, but it can be surprisingly complex. And to make things worse, there can be fees involved. Knowing the correct way to close your bank account could be the difference between losing money while you do so, and closing it hassle-free. Read on to learn what you need to know.
This seemingly complex process actually only takes a handful of steps to do correctly. Here’s what you need to do.
Different banks offer different benefits and fee structures, so it’s important to do your research before you choose your new bank account. You don’t want to be going through the process of closing one again any time soon, so choose wisely. Some questions you may want to ask before you make a decision are:
Considering all these questions will help you pick the best new bank account for you, something you’ll want to do before you close the old one so you can make the transition as seamless as possible.
Wise offers borderless multi-currency accounts that allow users to send, receive, hold and manage money in dozens of global currencies all at the same time. If you travel frequently or are making an international move, a borderless account can help you save on transfer fees while you move overseas. Customers in the EU also have access to consumer debit cards. Opening an account is free, and it can be done completely online.
For a seamless transition, you’ll need to update all of your direct debits, automated payments and direct deposits to your new bank account. This can seem like a particularly daunting task, but it doesn’t have to be. Just review your bank statements (at least six months worth, but ideally a full year) and highlight any automatic payments or deposits.
Keep an eye out for rent, mortgage, phone bill, utilities, gym subscription, streaming service subscriptions and any other regular payments you have. Then update all of them with your new bank account number and routing number. Allow 2-3 weeks for everything to completely shift over to your new account, and double check to make sure everything has shifted, so you don’t get stuck with payments or debits coming out of your old account after you’ve moved your money out of it.
Check with your bank to see if you have any outstanding checks, and make sure you’re not expecting any direct deposits. Lastly, let your employer know your new banking details.
You should start transferring money into your new account before you close your old one, since that way, you don’t have to wait for your old bank to process your account closing and your money is likely to be available in the new account sooner. Also, be aware that your bank may have daily transfer limits that can slow down the process of moving your money into the new account. Bottom line: It’s better to start this process as early as possible.
If you’re transferring your money into a new account in another country, be aware that most banks charge international transfer fees in addition to making money on the poor exchange rate they offer, sometimes profiting as much as 4-5% on currency conversions. Instead, try Wise, which allows you to move your money overseas at the exact mid-market rate, or the same exchange rate you see when you Google it, without any markups or hidden fees. All you pay is a small, fair transfer fee that’s spelled out upfront.
Once your account is closed, you’ll lose access to your online banking and any other information associated with the old account. Now is the time to download your bank statements and any other documents that you may need in the future, to make sure you have them even after the account is closed.
Once everything is switched over to your new account, it’s time to close the old one. You can send a letter requesting to close your account by mail, or you may be able to request to close it in person at a branch, by phone, or online. Whichever method you choose, make sure you request written confirmation from the bank (in the form of a letter) that the account has been closed and any further transactions using that account will be cancelled.
There can be. Some banks require accounts to be open for a minimum time period, and if they’re closed before then, charge a fee to recoup some of their costs for opening and closing the account. For example, US Bank and PNC both charge $25 if the account is closed within 180 days of being opened. Smaller local banks may charge even more.
When you’re finally ready to close your account, how long it will take depends on a few factors. It could take as little time as a day. However, if there are funds left in your account or if you haven’t rerouted all of your automatic payments, debits and deposits, it could take up to a few months. It’s also possible that once you close your account, if you missed an automatic transaction, it could cause your account to be reopened, which could leave you responsible for any applicable overdraft fees.
Even after you’ve followed all of the above steps, it may be a good idea to hold off on actually closing your account for 1-3 months, just to make sure you haven’t missed any automatic transactions that could cause you trouble.
Checking accounts, savings accounts, money market accounts and certificates of deposit are not included on your credit score, so closing any of these will not affect your credit score.
However, if you close an account at a bank that has loans or credit accounts associated with it, that could be a different story. If you close your longest-standing account, it will shorten your overall credit history and may have a negative impact on your overall score. Closing accounts with high limits and low balances will also likely ding your credit score.
No matter what your reason is for wanting to close your bank account in the US, this guide should help simplify what can be a complex process. The bottom line is that it takes a little time and careful attention to detail to successfully close an account. Good luck!
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This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
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