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Closing a checking account can open up a can of worms

Before giving your bank the heave-ho -- whether it's a case of moving to a new institution or to a new hometown -- give yourself at least a one-month lead time to make the transition to the new account.

Otherwise, you could end up with bounced checks, missing deposits or no access to cash from the nearby automatic teller machine.

The key is to start with your checkbook first. Balance it and make sure all outstanding checks have cleared before the account is closed. Getting a jump-start will ensure that the customer and bank agree on the amount of money due and bounced-check fees won't leave the account vulnerable.

A rule of thumb is to open your new account before closing the old account. That way, the flow of checks, ATM withdrawals and other transactions will be seamless. Also, make arrangements to stop direct deposit checks and benefits at least a month before the move. You might want to give checks a full billing cycle to clear through the old account before closing it.

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Automatic payment deductions such as mortgage or life insurance premiums should also be changed at least a month in advance.

While most banks can take new account information over the phone, it's safer to provide a new address and phone number in writing.

Remove all contents from your safe-deposit box and return the keys. Finally, let family members know that your account is closed, so that heirs won't waste their time trying to recover "forgotten" money in an old bank account.

Some banks move to help you move
If you're planning to move to another city, some banks will court you with a relocation package. Perks could include city guides, maps or other items handy to customers moving to a new city. Some banks have offer a free checking account and safe-deposit box for one year.

Unexpected moving snafus, such as the moving company only wanting a cashier's check, a grocery store that refuses to take an out-of-state check or a flat tire en route to the new home can all make for instant-cash scenarios.

So give yourself at least three weeks to get your new account set up. That way there's a strong possibility you'll have checks and a debit card in hand when you arrive in the new town.

Big banks make out-of-town moves easier
Mergers between banks such as Bank of America and NationsBank have aimed to create coast-to-coast banking and ATM networks. With that in mind, most large banks don't rely on in-branch visits to close accounts. Customers can process their requests through the bank's telephone call center.

Be forewarned, though: Ask if there will be a charge for assistance or a fee for closing the account. It can cost $10 or more to close an account, on top of any monthly fees.

Automatic payments can keep going and going
Under federal law, the customer must call or write the financial institution requesting a stop on automatic payments at least three days before the scheduled debit. If an oral request is made the bank may require a written confirmation within 14 days of the initial phone call, said Robin Leonard, a consumer debt attorney and author of Money Troubles: Legal Strategies to Cope with Your Debt.

"The key is dealing with the business doing the automatic deduction," Leonard said. "You certainly start with the bank but you've got to talk with your mortgage company. Surprisingly, we've heard it's been a nightmare for people who have joined the health clubs and have tried to stop the payments."


-- Updated: Jan. 15, 2004

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See Also
Your moving-day checklist
Switching banks when you have automatic debits
Checking study
More checking stories

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