What are zombie bank accounts? A zombie bank account is a real-life horror story that plagues consumers.
As the term implies, it is a dead bank account that is reactivated and comes back to life. Just as human zombies can wreak havoc in the movies, a zombie bank account can wreak havoc on your finances and credit rating.
How Bank Accounts Become Zombies
Zombie bank accounts exist because some financial institutions reserve the right to reopen a closed bank account if it receives an electronic debit or a direct deposit.
An example of this might be a direct deposit from a past employer or an automatic bill payment.
The potential problems such an account can create are immense. Once the account becomes active again, the bank can start charging fees, including overdraft fees.
Funds that a person thinks might be deposited in an active account might actually be in the zombie account.
If the zombie account becomes overdrawn and stays overdrawn, the bank might report that to the Big Three credit bureaus, which can result in a lowered credit rating.
To make matters worse there is no law requiring a bank to notify you if a deactivated account has become active again.
That means a zombie account might be active for weeks or even months before someone is aware of it.
By then a banking customer can be faced with hundreds of dollars in overdraft fees and a wrecked credit rating.
How to Protect Yourself from Zombie Bank Accounts
The first step you need to take is to check all of your closed bank accounts. If you close an account, try checking it once a month for the next year using online banking.
If you see it has become active again, call the bank and complain.
If any money gets deposited in it, immediately transfer those funds to another account.
When you close a bank account, get a statement and carefully go through it.
Make sure that all direct deposits and automatic bill payments have been transferred or shut down.
Make sure that any payments from investments, the IRS, government benefits, or employers go straight to your new account.
Another good piece of advice is to avoid automatic bill payment. Make sure that no payment leaves your account without your approval.
Instead, use the electronic bill pay feature that lets you set up and make the payments or write a check.
One advantage to electronic bill pay is that you don’t have to make payments until the money is actually in the account.
What to Do About a Zombie Account
The first and most important thing to do about a zombie bank account is to complain to the financial institution.
Try calling the bank and complaining or go to a branch and complain to a manager. If you make a nuisance of yourself, there’s a good chance bank executives will shut the account down just to get rid of you.
Then keep checking the account about once a week for a few months to make sure it is dead and stays that way.
If it becomes active again, complain to the bank again and file a complaint with the Consumer Financial Protection Bureau.
Financial experts say zombie bank accounts can become active again years after they’re closed.
That means it is a good idea to check all your closed bank accounts every few months to make sure they stay dead.