Reader “Justin” asks the following question via email:
Hey. I was wondering if you knew anything about automatic debits, particularly, if I decide to just close my checking account without opening a new one (and then run off to join the French Foreign Legion). Will the old checking account remain closed and will I effectively leave those auto bloodsuckers in the lurch? This is hypothetical of coarse.
I’ve thought about this same act, but more from the perspective of how my credit history would get screwed over by collections agencies chasing after me for payment.
You see, there’s three things that could happen by closing your bank account when there are auto-debits set up against it:
1. The bills becomes late then eventually goes to a collections agency. If it’s a utility bill, you can expect your utility to be cut off, and if you continue to not pay, they’ll send your account to collections and it WILL damage your credit history accordingly (I’m simplifying this a bit, but it really depends on the debits you’re talking about).
2. Your bank reopens the account, pays the bill and charges you overdraft fees. Seriously, it’s not a joke that some bank accounts will never just die. If you’re going to close an account, make sure to talk to a manager about what happens when a charge comes in after it’s closed, and try to get something in writing to cover your butt. If you don’t believe me, you should probably start reading The Consumerist.
3. Nothing happens/charge is rejected. What SHOULD happen is the bank rejects the charge and the vendor notifies you of missed payment AND you are a responsible adult and pay the bill. However, if it’s a fraudulent charge that won’t go away, your only choice may just be to close the account and hope it goes away.
Finally, if you do want a bank that’s not going to jack you in a situation like the one “Justin” is describing, consider opening up an account at USAA. They have really first rate customer service ratings and competitive rates of interest. Deposits are super easy, they return overpayments to their customers and when you call their hotlines, its much easier to reach a real person, not a recording.
For more on keeping up with your credit report and making sure your credit isn’t destroyed, check out these additional articles.