By Thinking about switching banks or closing an old account? Many Canadians worry that doing so could hurt their credit. While it’s a smart move to clean up unused accounts or switch for better banking features, it’s important to understand how to close a bank account without hurting your credit Canada.
The truth is, closing a bank account won’t directly affect your credit score—but mishandling it can lead to fees, overdrafts, or collections that absolutely will damage your credit. In this detailed guide, we’ll show you the exact steps to close a bank account the right way, and how to protect your credit in the process.
Does Closing a Bank Account Affect Credit in Canada?
In most cases, no. Closing a chequing or savings account won’t appear on your credit report and won’t affect your score directly. Credit bureaus like Equifax and TransUnion track credit accounts like:
- Credit cards
- Lines of credit
- Mortgages
- Personal loans
Bank accounts aren’t reported unless something goes wrong—like unpaid overdrafts being sent to collections.
So while the act of closing an account doesn’t hurt your credit, what happens before or after might.
One more thing to remember: if your account is connected to credit-related products like overdraft protection or personal lines of credit, closing it could disrupt those accounts or even show as account changes on your credit report. Always double-check how your bank structures its credit products.
Why People Close Bank Accounts in Canada
Here are some common reasons Canadians choose to close bank accounts:
- High monthly fees
- Switching to online or no-fee banks
- Poor customer service
- Merging accounts with a partner or spouse
- Simplifying finances
- Avoiding dormant account charges
Another reason worth mentioning is security. If you suspect your bank account details have been compromised or if there has been fraudulent activity, closing the account and opening a fresh one can be a smart move.
Whatever your reason, it’s important to close the account cleanly. Let’s go through the exact process so you can close a bank account without hurting your credit Canada.
Step-by-Step: How to Close a Bank Account Without Hurting Your Credit Canada
Step 1: Open a New Account First
Before closing anything, make sure you have another account set up to handle your everyday banking. This includes:
- Direct deposits (payroll, government benefits)
- Pre-authorized debits (bills, subscriptions)
- Automatic transfers (savings, investments)
Open a new account and take a week or two to switch everything over. Consider choosing a bank that fits your lifestyle—for example, digital-first banks like Tangerine or EQ Bank offer no-fee accounts with higher interest rates.
Step 2: Transfer All Deposits and Payments
Make a list of:
- Employers
- CRA or government benefits
- Utilities, cell phone, subscriptions
- Insurance, loan payments, rent
Update your banking details everywhere. Don’t assume it’ll happen automatically. Missing a payment because it went to a closed account can trigger bounced payments, NSF fees, or missed due dates—all of which can affect your credit.
This step also includes double-checking recurring payments like gym memberships, streaming services, cloud storage subscriptions, and automatic charitable donations.
Step 3: Let Payments Clear
Give it at least 30 days after your last known transaction before fully closing the old account. This ensures:
- Any outstanding debits clear properly
- You’re not closing the account while something is still pending
Monitor the account closely during this time. Some people choose to keep a small cushion (like $100) in the old account for one month to cover unexpected withdrawals or forgotten transactions.
Step 4: Bring Balance to Zero (Don’t Leave Overdraft!)
Make sure there’s no overdraft or negative balance. Overdrafts are credit products in Canada, and if you leave one unpaid, the bank can send it to collections.
To avoid damage to your credit score:
- Pay off any negative balance
- Decline overdraft protection if you don’t need it
- Ask for a confirmation in writing that your account is at zero
Also, remember to withdraw any remaining balance after everything clears. If you leave money in a dormant account for too long, inactivity fees could eat it up.
Step 5: Contact the Bank to Officially Close It
Go in person or call your bank’s customer service. Some banks may allow you to close an account through online banking or secure messaging.
Get written confirmation (or at least a reference number) of the closure. This protects you if fees or errors show up later.
Pro tip: request a letter or email that states “Account closed by client in good standing.” That document may be useful if you apply for future banking services or loans.
Step 6: Watch for Surprise Fees
Some banks charge account closure fees, especially if you close an account within 90 days of opening. Others charge inactivity fees, which can quietly drain the balance until you’re in the negative.
To avoid this:
- Ask upfront if there are closure fees
- Monitor your balance post-closure to ensure no new charges sneak in
If fees appear on a supposedly closed account and go unpaid, they can damage your credit score by being sent to collections.
Step 7: Monitor Your Credit Report (Just in Case)
Even though your bank account closure won’t show up, errors happen. A forgotten overdraft or closed account that was reopened without your knowledge can lead to collections.
Get your credit report free from:
Check your report a few months after closure to make sure everything is clean.
It’s also a good time to consider monitoring services, especially if you’re closing accounts due to fraud concerns.
Common Mistakes That Can Hurt Your Credit
1. Closing an Account With Overdraft Owing
Overdrafts are considered loans. If unpaid, they can hurt your credit if they go to collections.
2. Not Redirecting Pre-Authorized Payments
This can cause missed payments, which impact your credit score and cause fees.
3. Leaving the Account Dormant
Banks can charge inactivity fees. If your balance gets drained, it may go negative, triggering NSF charges and credit risks.
4. Forgetting Joint Accounts
Make sure both account holders agree. One person can’t usually close a joint account alone in Canada.
5. Ignoring Account Closure Emails or Letters
If your bank sends notices about fees, inactivity, or missed payments after closure and you ignore them, it could result in negative financial consequences. Stay alert.
What If There Are Issues With the Bank?
If a bank refuses to close your account or charges unexplained fees:
- Speak to a branch manager or escalate to head office.
- Submit a complaint in writing.
- File a complaint with the Financial Consumer Agency of Canada (FCAC): www.canada.ca/en/financial-consumer-agency.html
The FCAC oversees banks and ensures fair treatment of Canadian consumers.
You can also contact the Ombudsman for Banking Services and Investments (OBSI) if your issue isn’t resolved at the bank level.
FAQs
1. Will closing a bank account hurt my credit in Canada?
No, unless you leave unpaid overdraft or cause missed payments.
2. How do I close a joint bank account in Canada?
Both account holders usually need to be present or provide written consent.
3. Can I close my account online?
Some banks allow it, others require phone or in-person verification.
4. What happens to my credit if I leave a negative balance?
It can be sent to collections and lower your credit score.
5. Are there fees to close a bank account in Canada?
Sometimes, especially if it’s been open for less than 90 days.
6. How long should I wait before closing my old account?
At least 30 days after all payments and deposits have been updated.
7. Can I reopen a closed account later?
Some banks allow it within a short period; others require a new account.
8. What’s the best way to switch all my payments?
Create a checklist of every company tied to your bank and update them one by one.
9. What’s the safest way to close a business bank account?
Pay off any business overdraft, transfer balances, then close through your business advisor.
10. Should I leave some money in the account just in case?
Not if you’re closing it—but while transitioning, yes. Leave enough to cover unexpected payments.
Final Thoughts
Closing a bank account isn’t risky if you handle it the right way. The key is preparation: switch all payments and deposits first, clear your balance, wait for transactions to clear, and get written confirmation.
The most common way to damage your credit during this process is by missing a payment or leaving a negative balance. Avoid that, and you can close a bank account without hurting your credit Canada.
Always double-check your account statements, credit reports, and automatic payments after closing your account. Stay in control of your finances by being proactive, not reactive.
Remember—it’s your money and your right to choose a financial institution that works for you. Don’t be afraid to make a switch, just be sure you do it the right way.
Have you successfully closed a bank account in Canada? Share your experience or tips in the comments—they might help someone else avoid the same mistakes.
