What happens if you send money to a closed account?
Through the course of your financial life, you might open and close bank accounts, switch banks, or change employers, which can lead to confusion if money gets sent to a closed account, like if a direct deposit goes into a closed account.
So, what happens if you send money to a closed account? In some cases, you will receive an email alerting you of the problem, which will help recover your funds. Regardless, it’s important to contact financial institutions involved to make sure the money gets to the proper recipient and you’re not out extra cash.
Many banks have standards to follow in the event of misdirected money, but every institution is different. Check with your bank for advice on how to recuperate losses if money gets misdirected. Here’s what could happen after money is sent to a closed account.
The bank may keep the account open
If you happen to send money into a closed account, the bank may keep it open. This allows customers to fix the oversight if not replenish the balance within 24 hours. If this is the first time you have experienced money sent to a closed bank account and you are a responsible customer, your branch should be willing to work with you. Always investigate instances of incorrect deposits and call to discuss solutions.
The bank might issue a check
Banks have different ways of handling money sent to closed accounts, but some banks may issue a check to the account holder to replace lost funds.
For example, if you were hired at a company that has an option for direct deposit, but your first check was sent to a closed account before you could intervene, the company will wait until they receive their money back from the bank to issue a paper check to you.
The money transfer will be declined
Frequently, banks will notice a faulty account number or closed account and direct deposits will be returned to the sender or declined. How long does it take for money to bounce back from a closed account? Each bank has its own policies in place, but some sources supply a rough estimate of 5 to 10 days until funds are returned. Funds are more likely to be amended quickly if the account holder is in good standing.
If the closed account does not exist however, or the recipient claims the money belongs to them, an investigation could commence. Sometimes, it’s merely an issue of numbers entered incorrectly or out of sequence, but it’s possible that fraud occurred. You can take legal action against the responsible recipient in these instances. It may take up to 15 days for a resolution, so reach out within the first two business days of the discovered dispute.
Tips for avoiding misdirected payment
When money is lost or misdirected, it delays scheduled payments and disrupts day-to-day life. Avoid money being sent to a closed account by sticking to these three basic tips:
- To protect your payments, review official documents and double-check codes involving direct deposits. “Sent to a closed account” doesn’t necessarily mean you’re out of options, but it’s better to be prepared upfront.
- Cross-reference amounts and recipients, comparing what should have been paid/ received versus what actually landed in the account. This also helps create a paper trail for proof down the line.
- Adjust amounts when making initial direct deposits.
Another tip to avoid missing payments is to cancel any direct deposit accounts before canceling a bank account. Companies process checks before they are electronically sent, which can negatively affect your account.
Some services like Western Union allow you to track your transfer in hopes of catching any problems early on and help you solve returns and refunds. These can be made in certain situations like when the recipient of the transfer has not yet collected their sum and you may be able to stop the payment. If a refund is approved, it will be credited back to the card you used in roughly one to two weeks.
Western Union aims to make money transfer simple. Start sending money with confidence with our money transfer services that allow you to send online, in person, or with our mobile app. If you have questions about sending money with us, check out our frequently asked questions or read more on the Western Union blog.