Checking Accounts

Is It Okay to Open and Close Bank Accounts?

When you open a bank account, it’s easy to assume that you’ll stick with that bank forever. But that was then. Your old bank account has lost its appeal and there is a new checking account in town that is grabbing your attention. Now you ask yourself if opening and closing bank accounts is okay on a regular basis?

Can opening and closing bank accounts hurt my credit?

For the most part, opening and closing bank accounts won’t impact your credit at all.

The majority of banks will not check your credit when you open a new bank account, because they don’t care how good you are at paying back debt.

They care more about how you handle your bank accounts. So, instead, they look at something called your ChexSystems report.

When you close your bank account, there’s usually no impact to your credit. The only time that closing a bank account could impact your credit score is if you close your account with a negative balance.

Fees that can lead to a negative balance

It’s not something anyone plans on doing, but most people overdraft their checking account at some point in their lives. This means that your checking account’s balance will fall into the negatives.

If you close your account (or the bank closes it for you), the negative balance might be sent to a collections agency so the bank can recoup some losses. This can hurt your credit score.

Overdraft fees can be quite expensive and every bank charges them. With an average fee of $35, it’s not unusual for your balance to go deep into the negatives once you start overdrafting.

Your balance might also go negative because of account inactivity fees, which are typically $10/month. And some banks will charge a fee as high as a $25 if you close your account too soon after opening.

Once your balance is in the red, you can no longer make withdrawals from the account until you deposit enough to make the balance positive.

How can you avoid overdraft fees?

If you don’t overdraft your checking account on a regular basis, you can always contact your bank and ask for a fee refund. Many will forgive occasional overdraft fees.

Of course, the better option is to keep enough money in the account to serve as a buffer. You can also sign up for overdraft protection transfers, which will help you avoid the fee.

What is ChexSystems?

ChexSystems is a consumer reporting company that tracks how you interact with banks. You can think of it as a credit report, but for bank accounts.

Every time you open and close an account, it is tracked on your ChexSystems report. Things like overdrafts and accounts closed with a negative balance will also be tracked.

The good news is that most banks don’t care how many accounts you’ve opened and closed. They’ll mostly look for red flags like accounts closed with a negative balance. That could impact your ability to open a new bank account.

Why would I want to open and close bank accounts?

So, why would someone want to regularly open and close bank accounts? Isn’t one savings account and one checking account enough?

Here’s the simple answer: money. Banks often offer signup bonuses to people that open new bank accounts. You can make hundreds or even thousands of dollars a year by opening and closing bank accounts to take advantage of these signup bonuses.

Examples of bank account signup bonuses (banks can change or cancel signup bonuses at any time)

Chase Checking Account$300Receive at least one direct deposit
Citi Checking Account$200, $400, or $600Deposit $5,000, $15,000, or $50,000 for 60 days
PNC Virtual Wallet Account$50, $200, or $300Receive $500, $2,000, or $5,000 in direct deposits and make 10 debit card purchases
HSBC Advance Checking Account$350Deposit $10,000 for 90 days.
Bank of America Core Checking Account$100Receive two $250 direct deposits
Charles Schwab Checking Account$100None

Final thought

Bank account bonuses are a great way to keep your savings liquid while getting your money to work for you. They’re also very low-risk, as there’s almost no negative effect should you fail to qualify for the bonus in the end.

Consider taking advantage of some national bank’s account bonuses. And don’t forget to look at offers from local banks to see if there are any lucrative deals available where you live.

Once you’ve earned your bonus, close the account so you can avoid fees and move your money to the next bonus-paying account.