Can Banks Close Accounts for Insufficient Funds?

Having your bank account closed can cause a whole mess of problems and make simple financial transactions, such as cashing your paycheck, more difficult. Your bank can close your account if you don't have enough money in it to cover your transactions and your balance is negative. How quickly your bank takes action depends on its internal policies.

The bank usually will attempt to contact you to bring your account to a zero or positive balance before closing it. Even if you always bring your account back to a positive balance, repeatedly having insufficient funds may lead to account closure. Once the account is closed, you still owe the bank the amount for which your account was in the hole. That amount often includes fees and other penalties for having insufficient funds. If you don't pay, the bank may turn the debt over to a collection agency and report you to a bank account reporting agency. Other banks check your record at the agency when you apply for a new account; negative entries may result in a bank refusing to open an account for you.