Picture this. You log into your bank’s online portal to see a notification that your bank is closing. What happens next?
While a bank or credit union is the safest place to keep your money, if your bank closes, you may need to retrieve your money and move it to another bank account. When a bank closes, it might not announce the reason publicly to customers. If the bank is part of a larger network, it could close some physical branches to decrease its overhead costs. But a bank could also close due to a bank failure, which happens when it can no longer handle its financial obligations to customers, lenders and investors. In this scenario, if the branch is part of a larger banking network, you may be able to find another nearby branch or manage your account online. But if it’s an independent bank or the only branch nearby, you may need to find another way to manage your money.
Regardless of the reason, we’ll walk you through what you should do if your bank closes.
What a bank closure means for your money
If your bank is federally insured and decides to close a branch, it must notify you at least 90 days ahead of the closing date, according to the Federal Reserve. Your bank should also post a notice at the branch location.
If this happens to you, you can choose to bank at a nearby branch or online. However, if a branch closes and online banking or visiting another branch is inconvenient, you’ll need to find a different place to store your money.
If your bank or credit union closes all its branches due to a bank failure, you may need to move your money to a different bank altogether. If you don’t move your funds before the bank closes, here’s what you can expect:
If your bank is FDIC- or NCUA-insured
Most banks are insured by the Federal Depository Insurance Corporation, which protects your deposits for up to $250,000 per account, including checking, CDs, money market and savings accounts. If your bank closes, the FDIC will either try to move your money to another bank in good standing or mail you a check for up to the insured amount. If your money isn’t moved, the bank should mail you a check within two business days of the bank closing.
If the money is in a trust or issued through a broker or employer plan, the FDIC will need supporting documentation -- and it may take longer to receive your funds. If you have more than $250,000 in your account, it’s still possible that you can receive the full amount, but you’ll need to file a claim with the FDIC. Then, as the bank’s assets are liquidated, you may receive payments.
The FDIC doesn’t protect the following, even at insured banks:
- Life insurance policies
- Mutual funds
- Safe deposit boxes
- US Treasury bills
Similar to the FDIC, the National Credit Union Administration insures credit union bank accounts. If your credit union is NCUA-insured and decides to close, you’ll receive a notice by mail. If you don’t move your money to another account before the credit union closes, it will send you the funds from your deposit account within five days from the credit union closing, according to My Credit Union. If your balance is higher than $250,000, you’ll need to complete a Member Confirmation and Affidavit form to receive any funds over the insured limit.
The NCUA doesn’t cover losses from the following:
- Life insurance policies
- Mutual funds
If your bank is not insured
If your bank is not insured, the FDIC or NCUA may still transfer your accounts to another bank. Just make sure the new bank is insured to protect your deposits. You’ll still need to file a claim with the FDIC or the NCUA, but there’s no guarantee you’ll get your money back.
What to do if your bank closes
Regardless of why your bank closed, you have options for managing your money. Here are a few:
- Open an online bank account: If you rarely visit a physical branch, you might prefer to open an account online for everyday banking. Some online banks even offer co-op branches for in-person services.
- Look for another physical branch bank: If you prefer to bank somewhere with a physical branch, look for another bank with some of the same services and features you’re used to. If your bank is regional, there may also be another branch nearby.
But what happens if you can’t find a nearby branch or online banking isn’t an efficient solution for you? In this case, you might face a problem that plagues 5.6 million Americans -- you may be living in a banking desert, according to the Federal Reserve.
How to navigate a banking desert
Between 2008 and 2020, more than 13,000 bank branches (approximately 14% of all banks) shut down across the US, according to the National Community Reinvestment Coalition. As more banks and branches close across the country, your physical branch choices may be limited. If you no longer have a bank within a 10-mile radius of your home, you’re in what’s considered a banking desert, according to the Federal Reserve. Living in a banking desert -- an area where access to a physical bank is unavailable -- can make banking more challenging.
Not having access to a physical bank is inconvenient -- and in many cases, it can make managing your money more expensive. Obtaining simple banking services like depositing cash into a bank account, cashing a check, obtaining a cashier’s check or sending a wire transfer can be costlier without a physical bank nearby.
Here are some solutions that may make banking more accessible if you’re in a banking desert.
Use mobile banking, but have a backup plan
You may use online banking to handle day-to-day transactions, such as depositing a check or transferring money to a savings account. But you’ll need a backup plan when you need in-person services.
One solution may be driving to the nearest physical bank, even if it’s not close by. You can also call your bank’s nearest physical branch for help if the bank is too far or you need help with a banking service. For instance, if you need a cashier’s check, you may be able to ask the bank to mail it to you. Not all banks will do this, but if yours does, it could save you the trip.
Read more: Are Online Banks Safe?
Go to stores with banking services available
If you need to cash a check or wire money regularly, traveling far might not be possible or convenient. Sometimes, you can handle some banking services at your local convenience or grocery store. Some banking services require a fee but are still safe and convenient. Here are a few major businesses with banking services to help make banking more convenient if a bank isn’t nearby.
- Fred Meyer
- Fry’s Food
- Harris Teeter
- United States Postal Service
Talk to others in your community for help
If you’re in a banking desert, chances are you’re not the only one in your neighborhood looking for a solution. Ask your neighbors, coworkers or friends how they manage their money without a nearby bank. They may know of convenient ATMs with banking services or other community resources. And, if traveling out of town is the best option, you may be able to pool together to make trips, helping to save money on gas.
You can also ask your employer about banking relationships available within your company. As an employee, you may have access to lower fees and special banking benefits for your area.
The bottom line
The best way to protect your money from a bank failure is to ensure your bank account is FDIC- or NCUA-insured. You can use the online FDIC tool or call the phone number (1-877-275-3342). If you’re considering a credit union, check the online NCUA tool. You can also look for the FDIC or NCUA sign at the physical branch or website.
If a bank branch near you closes, you can often switch to another nearby branch or opt to bank online. You can also switch banks if another financial institution is more convenient. If there isn’t a bank nearby and you find yourself in a banking desert, a combination of online banking and relying on stores or ATMs with banking services may help you manage your money.
Your direct deposit paychecks or Social Security payments may be rerouted to a new branch or bank if the FDIC or NCUA redirects your account. However, we recommend reaching out to your employer or the Social Security Administration with your new bank account information as soon as possible to prevent delays in receiving your payments.
If you have a loan with a failed bank, the FDIC will sell your loan to a new bank. You’ll be notified of the transition so you can set up an account and continue paying your balance. If your loan is through a credit union, you’ll be able to continue sending payments to the NCUA’s Asset Management and Assistance Center.