How can I avoid overdraft fees while moving all of my funds to a new bank?

Question

I called my bank to close my account. The sequence of events they told me was required is:

• Transfer all of my funds to the other bank (makes sense).
• Wait up to 2 business days for the transfer to complete.

But when I asked:

• If I transfer all of my funds from my account and some automated monthly subscription I've forgotten to cancel comes through, I'll be charged an overdraft fee.
• Can I suspend all new transactions on the account? No.
• Is there any solution for this or way I can safely empty my account without worry about about incurring overdraft fees? No.

Obviously the best solution would be to carefully track all of your monthly subscriptions and move them to the new account, but I've been a bit frivolous with these (Netflix, Hulu, Youtube, HBO, Amazon, Apple TV, Apple Music, Vimeo, Github, the list goes on and on) and have so many, I'm tempted to use this as an opportunity to let them all fail to renew and only update billing for the ones I actually notice not having anymore.

I'm just a little surprised that I'm not allowed to suspend charges on my own bank account, especially after telling the bank I want to close the account.

Edit: Now that I realize it matters (jealous glance at Europeans), I am in the US.

Answer 1

This is a very US-centric question and answer.

Don't bounce payments. Use credit cards for that.

and some automated monthly subscription I've forgotten to cancel comes through, I'll be charged an overdraft fee

Because bank accounts require more personal responsibility than credit cards. The overdraft fee is the "lite" punishment for bouncing charges. The "heavy" punishment is a 7-year ban from using banking - you become one of "the unbanked". If you wonder who uses those weird pink neon check cashing stores, it is the unbanked.

The punishments are fierce because bouncing checks is serious business. Also, the bank is providing you a service - for that $39 fee they're giving you overdraft protection in many cases, paying the charge anyway and letting your account go negative for a few days.

You should treat your bank accounts with a certain amount of respect and fear.

For this use-case (e.g. monthly subscriptions), you should be using credit cards, not bank account debit. Credit cards are specifically designed to use the way you are trying to use it - charges that will have no consequence to you if they are declined.

Further, credit cards provide vastly better consumer protections in all sorts of ways, which suit themselves well to a person like you who isn't necessarily always on top of everything. (like me too, no judging here).

Even if you don't have good credit, seek out a deposit-type credit card, where you give the bank $500 cash and they give you a credit card with a $500 credit limit. Don't use "prepaid visa/mastercard gift cards" like you buy at the checkout lane at grocery stores; they have many gotchas and most subscription services won't accept them anyway.

"Unsubscribing by breaking payment methods" is a dumb idea.

Because most banks and credit cards will do their level best to make sure trusted services like Netflix are able to continue charging, even with obsolete card info. Why? It saves them millions in customer support costs.

If you want to unsubscribe, the absolute best way is to log onto the service, and use the "unsubscribe" feature (at the risk of stating the obvious). It also helps to delete all your payment methods.

How to untangle the mess

Actually, I'm doing that right now, because I am wrapping up an estate which has many automatic deposits and debits in/out of its bank accounts. Easier for you, you have all the passwords to those services lol.

The key thing, I'm guessing you either trash all your bank statements or did paperless and never look at the statements. OK, it's time to look at them.

• Log into your online account at the bank (I gather you have one; if not call bank CS and create one).
• Pick the checking account in question.
• Look for "Statements".
• This will give you a list of all your monthly statements going back 10 years.
• Click the most recent statement, grab a note pad and write down every charge. Especially if it looks like a subscription service.
• Click the previous statement, write down any charges you haven't already seen.
• Lather rinse repeat, with every statement going back 13 months. That will catch annual subscriptions.

For each of those services:

• Log in.
• Go to "account / payment methods".
• ADD a credit card payment method.
• Very important: DELETE your bank account payment method.

You need to delete the bank method, because if your primary is declined, many will automatically try every other payment method in the system until they find one that works. Deleting the payment method is the only way to stop them doing that.

How to close a bank account

There is no law that says to open an account, you must close another. You can have as many as you want. In most cases there is a monthly fee, but that is the only downside.

So, you move most of your money out of the old account into your new account, and start doing all your business out of the new account.

But leave enough money in the old account to cover a couple months of your automatic debits. If there's a minimum to avoid fees in the old account, and you can afford to leave that amount there plus a bit for charges, then do so.

Labor as I described above to identify and move all your periodic charges.

Check your old bank's statement every month. When you get 1 statement that was quiescent (no activity except for a monthly fee), then go into the bank, see a banker, close the account and take it in cash.

Answer 2

Obviously the best solution would be to carefully track all of your monthly subscriptions and move them to the new account, but I've been a bit frivolous with these (Netflix, Hulu, Youtube, HBO, Amazon, Apple TV, Apple Music, Vimeo, Github, the list goes on and on).

What I would do is move most of the money to the new account. Keep enough in the old account to cover a month or two of these monthly subscriptions. Then use the next 60 days to transfer the billing to either a credit card or the new bank account.

You should also check the old account to see if there were any you forgot. Every time one is pulled from the old account, go online and switch it to the new payment method.

If it turns out you underestimated the amount of monthly charges, you may have to move money back to the old account.

You will still have to look at the bank transactions for the last year or two to look for two other things:

• Annual charges for some things. This can be from Amazon Prime, or your auto insurance.
• Things that pull funds from your bank account on an irregular schedule. This can be used to replenish funds on the loyalty card from the coffee shop, or the subway/commuter train.

To make the search easier, most banks allow you to download all your transactions into a spreadsheet. Searching inside the spreadsheet should be easier.

I'm just a little surprised that I'm not allowed to suspend charges on my own bank account, especially after telling the bank I want to close the account.

We have had questions about this. People are amazed when a cancelled bank account springs back to life when an unexpected transaction arrives. Of course what you want to have happen is the bank to reject the transaction. But the impact is that you will have the potential embarrassment of the transaction being denied. and the possibility that the vendor will hit you with a service charge for the denied transaction.

Answer 3

I'm skeptical of the information your bank gave you.

If your account has a branch/physical location, I would suggest just going there and physically closing your account. They'll give you a check on the spot for your balance, and your business relationship with them will be terminated. Any further charges against that account will be declined. You'll be liable to those creditors for any declined-payment fees, but you certainly won't face a fee from the bank.

I don't have experience with closing internet-only accounts, but I'd be surprised if they don't also offer you the option to close your account on the spot and mail you a check (for free) or wire the funds elsewhere (for a fee). Waiting for the check will take some time, but the wire transfer should be practically immediate. I do agree that you probably don't want to do an ACH transfer in this situation -- it potentially takes too long, and the account you're closing probably has to be active through all of it.

Option 2)

• Open another account at the same bank. Take care that the new account isn't set up to provide overdraft protection for the old one.
• Transfer all your funds there (this should be instantaneous because it's the same bank).
• Close the original account -- you're now protected from any recurring charges.
• At your leisure, transfer all the money from your new account to the new bank.
• Close your temporary account.

Answer 4

If you don't really care about retaining some subscriptions and/or you're sure that whoever you set up autopay with will have a grace period to permit you to fix your payment option, you can open another account in your existing bank, move all your money there and once money are moved - which should be really fast, like a matter of minutes for most of the U.S. banks, close your old account which should also be relatively quick.

Then you can transfer money from your just opened temporary account to the new bank and update all your autopay subscriptions with the new payment option.

That way you wouldn't incur overdraft fees while also eventually discovering everyone who you set up autopay with. Everyone who tries to withdraw money from the closed account will get a reject. I did exactly the above with one of my accounts and I didn't have any issues. It obviously won't work in situations when you try to pay with the check associated with the old account - in that case you'd likely face a fee, but it wouldn't be an overdraft fee, rather a standard check deposit rejection fee.

Answer 5

I would explore the business relationship between the two banks. Perhaps opening a specific type of account at Bank B (your future bank) will have some positive network effect back to Bank A (which you are leaving). This could be favorable to any debt obligation you have to Bank A. Good luck.