Zombie Bank Accounts – The Penny That Won’t Go Away

Sometimes an account just won’t die.  Here’s one subtle reason why your brokerage account may claw its way up out of its grave, and how to put it back in again.  Let’s learn from this poor soul’s experience.

From Consumerist:

Chris was one of the many in October who closed their bank accounts with Bank of America, and other similar big retail banks, in protest over planned fees for using their debit card. But last week she found it had been reopened for no apparent reason, with a 1 penny balance out of nowhere.

KING5 reports she’s gone to close it three times, each time thinking it was the last, and each time finding out later that it was still open.

“It’s not so much about the penny,” she told KING5. “It’s a lousy penny, but it’s about what it stands for.” Presumably what she thinks it stands for is the bank’s ability to tell you one thing and then go ahead and do whatever it wants.

The article continues:

One way that accounts can be reopened is if you’ve ever given a company the authority to bill directly from your checking or savings account. Once that’s been authorized, they can bill your account at any time. That activity will reopen your account and accrue debits, which can rack up into compounding overdraft fees.

There’s also another reason that  zombie account can stay open after you close it down, at least in the securities industry: the accrued interest payable to you.  I’m not sure if this is the case for the above account, but it is something I’ve run into more than a couple of times in the brokerage industry.

Here’s how it goes: first, you notify the broker that you want to close the account and have the money transferred to a new broker.  Usually you can do this by having the receiving institution send a form to the sending institution.  The sending institution then transfers the cash and securities to the receiving institution.  The next day you check your old account, thinking it’s closed, but it’s still open.  A few days after that, there’s a penny or some other nominal amount of money in the account.  Usually, after the end of the month, the sending institution will ACH the cash to the receiving institution, and that will be that.

It’s not really a big deal, but it can be a pain to a customer who wants to completely sever their relationship with a bank.  It just takes a while.  Again, I’m not sure if that’s the case here, but the zombie accounts I’ve seen get their unholy supernatural power from the accrued interest payable to the customer.  Take the interest out and the zombie account sink back in its grave.

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