Can a Bank Close Your Savings Account for No Reason?

When you establish a savings account, you enter into a contractual agreement with a financial institution. Your bank agrees to pay interest on your deposit and to provide you with banking services, and you agree to deposit money into the account and to pay fees if you overdraw the account or even if you fail to keep a minimum balance. As with many types of contract, either party can opt to end the relationship at any time and for any reason.


Laws
Banks attempt to generate profits by writing loans and charging fees for deposit services. Like any business, a bank has a right to decide what services it will provide and who should have access to those services. Banks have no legal obligation to open accounts for everyone although banks cannot discriminate against classes of people based on factors like race, gender or religion. If your bank allows you to open an account, you have the right to close the account at any time although you may incur a small penalty fee for doing so. Likewise, your bank can decide to terminate your account at any time for any reason or for no reason at all since no laws exist that prevent banks from closing accounts.

Deposit Agreement
When you open your savings account, your bank must provide you with a copy of the deposit agreement or the customer agreement. This document contains details of the bank's policies about various matters including the closure of accounts. Although state and federal laws do not prevent banks from closing accounts, state contract laws require banks to abide by the procedures listed in the deposit agreement. Therefore, if your deposit agreement includes a clause that limits your bank's ability to close your account, your bank cannot close your account for no reason. However, deposit agreements typically contain verbiage that enables a bank to close an account for any reason.

Procedures
As standard procedure, banks send out account closure letters prior to closing bank accounts. Therefore, you should receive notification of your bank's intention to close your savings account prior to the account being closed. Banks send out notifications to reduce the likelihood of account holders writing checks or making withdrawals that could potentially bounce due to the account closure. However, these closure letters are usually sent to your last known address, so if you move or fail to check your mail, you may not realize that your bank closed your account until you try to access your funds. The remaining funds in a closed account are normally disbursed in the form of a check.

Closed Accounts
While a bank can close a savings account without having a specific reason for doing so, banks usually close accounts for a particular reason. If you frequently overdraw your account or deposit fraudulent checks, your bank may close your account on the basis that you have committed account abuse. If your bank goes bankrupt, the Federal Deposit Insurance Corp. attempts to find a buyer to take over the bank's assets but, in the absence of a buyer, the FDIC could close your account and disburse the funds. Furthermore, aside from closing your savings account, your bank can even opt to sell your account to another institution without gaining your prior approval.