Planning to switch banks? Hope you have a bottle of aspirin handy because, odds are, the bank is going to do everything it can to keep you around, and that adds up to a major migraine for you. A new report documents all the roadblocks banks throw up to keep their customers from leaving, from charging you money to generating as much hassle factor as possible. It’s like that line from the Eagles’ “Hotel California:” You can check out anytime you like, but you can never leave.
Nonprofit Consumers Union recently gathered data about the account-closing policies and procedures at the 10 biggest banks in the U.S. As it turns out, that was more of a project than any single consumer would want to tackle; the study’s authors say the nitty-gritty about exactly what’s required and what, if any, costs you’ll incur for closing an account can be buried deep in the fine print of print brochures and web pages — and sometimes aren’t even found there. What’s more, the group’s secret shoppers found that some customer service representatives gave people incorrect information about account closures.
For starters, the process takes a long time — more than a month was common among the bank customers to whom Consumers Union spoke — and a lot of money. Customers either need enough of a cash cushion to cover their bills while the process is taking place or run the risk of having checks bounce and debits overdrawing their account.
About half the banks Consumers Union surveyed actually charge you for the privilege of closing your account (a finding TIME Moneyland also discovered when researching checking account costs at big banks). If you close your account within 180 days of opening it, HSBC, PNC and US Bank all will hit you up for $25. BB&T and Citi both charge $25 if you close the account within 90 days. While this won’t apply to most people, the advocacy group points out that there are plenty of legitimate reasons for having to switch banks shortly after opening a new account, such as an unanticipated move, a divorce or other circumstances that require relocating.
Thanks to a processing time of four to six weeks for something as basic as switching your direct deposit, or switching something like an automatic withdrawl for a mortgage or car payment from one institution to another, the task of switching banks can take months, and that’s if you find out how to do it in the first place. Some customer service representatives at Chase told Consumers Union secret shoppers that an account has to be closed at a branch; actually, it can be closed by mail, by phone or in person at a branch.
Although the glacial speed at which third parties process your requests isn’t your bank’s fault, they definitely take advantage of the lag time. For instance, if you have just a couple of small bills on automatic payment that haven’t transferred yet, it’s reasonable to want to keep just the bare minimum in your account, but doing so could trigger a monthly maintenance fee. If you have a lot of automatic payments and you overlook one that hasn’t flipped over from the old to new institution, you could get nailed with an overdraft fee — and a late payment fee from the merchant or vendor trying to collect the payment, to boot.
There are three ways you can get your money from Bank A to Bank B: cash it out and carry a (potentially large) sum of money to the new institution, get a certified check or have your old bank do a wire transfer. Obviously, the latter is the most efficient because the transfer can happen in the same day; it will take up to seven days for a certified check to clear into your new account, the report says. A same-day wire transfer is the most expensive way to move your money, though. Banks surveyed by Consumers Union charged between $24 and $30 for a same-day wire transfer, and up to $10 for a certified check.
Chase and Bank of America will reopen a closed account if any attempt to deposit into it is made, Consumers Union says. BofA will also reopen a closed account if an attempt to withdraw from it is made. In other words, that $20 check you wrote a co-worker for your boss’s group holiday gift that she only got around to cashing now could be enough to trigger what the report calls a “zombie account.” You could be assessed overdraft or insufficient funds fees, monthly maintenance fees and other charges, the report warns.
Not only is this totally legal, the bank doesn’t even have to give you an immediate heads-up that this account has come back to life and is generating all these fees; you might not know until you get a statement in the mail informing you of the charges your “closed” account racked up. This cycle of maintenance fees and overdrafts can occur if your account is just “zeroed out” rather than closed, so it’s not enough just to draw down the balance to $0 and forget about it.
Consumers Union concludes its report by urging lawmakers and the Consumer Financial Protection Bureau to put consumer protections into place that speed up the pace for switching banks, curtail the time-consuming red tape and prohibit account closing fees and “zombie” account reopenings. In the meantime, the best advice we’ve got is that if you want to switch banks, be prepared to expend time as well as money on the task.