Accrued Interest

• When you close your bank account, you should receive all of the interest you have accrued up to the date you close the account. The interest accrual terms differ from account to account, so speak to a bank representative to determine how and when your account earns interest. If the interest is only credited at the end of the month, it may make sense to wait until the beginning of the next month to close the account, especially if you have a high balance and earn a lot of interest. When you close your account, you can specify whether you prefer a check, or a transfer to another bank account. Some banks charge a fee for wire transfers, so get the cost up front if you plan to use that method.
  
  

1099 Form

• If you have earned any interest on your account, you will receive a 1099 form from the bank, even if you close your account before the end of the year. You can expect to receive this 1099 statement in the mail in January or February. If you do not receive it, you should contact the bank to request a replacement. Reporting the proper amount of interest is important, because the Internal Revenue Service receives copies of all your 1099 forms. If there is a disparity, you could end up owing additional taxes, and possibly interest and penalties as well.
  
  

Interest Rates

• Banks are always competing for customers, and one of the ways they compete is to offer higher interest rates on checking and savings accounts. That means it is smart to shop around frequently for a better interest rate. If you can find a higher interest rate at another bank or credit union, it might make sense to close your existing account and move your money where it will earn a higher rate of return.
  
  

Other Considerations

• Getting credit for your accrued interest is important, but it is not the only consideration when you close a bank account. Before you close any bank account, you should first stop any automatic withdrawals or checks you have coming from the account. You should also stop any direct deposits you have going into the account. If you fail to make those changes, you could end up with late charges on your bills, and problems with your paychecks and automatic transfers.