Imagine taking a friend out for dinner on their birthday, only to have your debit card declined. You know you have plenty of money in your checking account. You’re left feeling embarrassed and confused.

A similar scenario is faced by thousands of bank customers each day. The ATM won’t dispense money, a bank-issued credit card charge won’t go through, or a person’s debit card is denied. Unless that person keeps plenty of cash on hand, they may be in a pickle for a while.

Why is it happening?

Despite all the safety procedures in place, fraudulent activity exploded during the pandemic, leading banks to look closely at customer transactions. According to federal law, if a financial institution notices irregular behavior that cannot be easily explained, the bank must alert law enforcement and regulators by filing a Suspicious Activity Report.

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If the situation appears to be serious, banks have the right to close the account entirely. While that may not seem fair, the financial institution can call it quits at any time — as hidden in the small print of the contract you signed when you first opened your bank account.

Why would banks risk angering customers?

Banks that fail to report suspicious activities are potentially on the hook for penalties if regulators later discover the issue. Banks view closing accounts as a safeguard against financial penalties.

A bank can also freeze, restrict, or close an account if it appears a third party is trying to defraud the customer. In that case, the bank is looking out for its interest and the customer’s well-being. Sometimes, when a customer can’t access their bank deposits, it’s because the bank has frozen or restricted their account just long enough to conduct a thorough investigation.

Banks must inform customers in writing of their decision to close an account. However, there’s no guarantee that the customer will see the letter before they attempt to access their money.

Once an in-house investigation has been completed and it becomes clear that the account holder isn’t up to any criminal activities, the funds are released back to the account holder. If the account has simply been frozen or restricted, the account holder can decide if they want to remain a customer with that bank or find another financial institution.

What to do if your bank account is frozen, restricted, or closed

Learning that you have no access to the funds in your bank account may leave you in a state of panic. However, there’s no time for that. There are steps you need to take to set things right.

1. Contact your financial institution

If your financial institution offers 24/7 customer service, you’re in luck. However, if your bank or credit union provides customer service only during business hours, you may be forced to wait until the next business day to ask about your account.

In either case, learn everything you can about why your account is unavailable. The earlier you find out, the more time you have to collect the evidence you may need to get a frozen or restricted account released.

2. Make a list of outstanding checks and automatic payments

If you’re still writing checks, look at your register to see if any are outstanding. If you’ve written a check, but it has not cleared your bank, contact the party to whom it was written. Let them know that your account is frozen, but you want to ensure they’re paid as promised.

If the check was written for a small amount of money and you have enough cash on hand to pay it, that’s one option. You can also use a credit card not issued by your bank to cover the expense until your account is cleared.

For example, if you have a Visa card through your home bank, it will be frozen along with your checking account, savings account, and any other accounts you hold with the bank. Any credit cards issued through other financial institutions will work as usual.

3. Gather evidence

Once the bank informs you of why there’s an ongoing investigation or your account has been closed, look for any evidence to prove the case wrong. For example, banks must report any deposits over $10,000. Let’s say you’re a contractor and are currently remodeling a home, and getting paid in increments of $10,000 to $15,000 for the work. The contract the homeowner signed before you began the project should be enough to prove that you’re not involved in criminal activity.

If all else fails, hire a legal professional to argue your case. If you can’t afford a lawyer at standard rates, provides a list of free and low-cost legal assistance.

Ideally, the safeguards in place to catch the bad guys would be refined enough to recognize the difference between funding terrorism and making regular bank deposits. Until the system can tell the difference, though, it’s good to know that your accounts could become inaccessible. That way, if it does happen, you’ll understand why and know what to do next.

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