What Is a Zombie Bank Account?

When bank accounts rise from the grave

Erin O'Neil
by Erin O'Neil, Staff Writer (@econeil)
Zombie Hand

A zombie bank account refers to the practice of banks reopening closed checking accounts without notifying the account holder, or bank accounts “coming back from the dead.”

When a Closed Account Comes Back to Life

Even when an account is officially marked closed, several of the largest banks in the U.S. reserve the right to reopen them if a credit or debit hits the account, instead of declining the transaction. Bank of America, Chase, and Fifth Third Bank are 3 examples of financial institutions which outline this practice in their checking account agreements. Banks are not required to notify customers if their closed account has been reopened.

Racking Up Fees on Closed Accounts

Customers are responsible for updating their Direct Deposit and Automatic Debit information for bill payments. But with the growing popularity of online billing and mobile banking, it’s easy to see how a stray debit could hit a closed account. And that could mean racking up a lot of fees, not to mention the hassle of having to close the zombie account.

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For example, let’s say you’ve closed an account at Chase but forgot to switch over a small utility bill of around $30, which would be easy to forget since not all utility companies bill on a monthly basis. For Chase’s basic checking account, the Overdraft Fee is $34. Since Chase isn’t required to notify you that the closed account was reopened, chances are high that after 5 days you’d also incur the Extended Overdraft Fee of $15. Since technically you now have an open account at Chase, you’d be subject to the monthly maintenance fee of $12. Already, that’s $61 in fees for a $30 bill, and that’s only for the first month!

A recent study on banking by the Consumers Union reported that some banks also charge account closing fees for accounts opened less than 90 days, so you could also be charged an additional fee to close the zombie account. Since banks are under no obligation to notify consumers, customers may not even be aware of what hit them until they receive a statement for the closed account in the mail.

Resources for Consumers

If you’re having issues killing a zombie account for good, the Consumer Financial Protection Bureau has an online complaint form that they use to log the issue and notify the offending bank on your behalf.