When a bank account is frozen, it is for a reason the bank finds to be appropriate, usually, it is to stop future regulatory violations, ongoing violations of bank policy, or cost-saving measures.
Sometimes it could be a useful and needed tactic for you to keep your account secure, however, it could also be a major inconvenience.
Banks regularly monitor accounts for suspicious or illegal activity.
If your account raises some red flags, it will be frozen and put under investigation until the issue can be resolved.
When your account is frozen, you will not be able to use it at all to withdraw money or make payments.
Funds that are exempt from being frozen are governmental funds, such as Social Security, disability benefits, unemployment, child support, and private pensions.
Why Your Account was Frozen
You have an unpaid debt.
Credit card companies are able to request for the bank to put a freeze on your account if you have unpaid debts.
They have to receive authorization from the court by getting a court judgment for debt written against you.
There is prolonged account inactivity.
The bank will become suspicious when an account is opened and has no activity or history of transactions.
There is some sort of suspicious activity linked to your account.
Certain patterns of behavior or dollar amounts raise red flags to the banking system.
This is put into effect to prevent money laundering and terrorism.
In some cases, law enforcement requires the bank to freeze an account in order to investigate.
A freeze was needed for account protection.
If the bank notices spending on your account that does not match your usual spending patterns, the bank may think that the account has been hacked.
In this case, there will be a temporary freeze on the account.
You can grant a temporary freeze on your own account in case your credit or debit card was lost or stolen to ensure the safety of your money.
The Difference Between a Frozen, Suspended, and Closed Account
The difference between an account being frozen, suspended, and closed is pretty apparent.
A frozen account is not available for use until it is unfrozen which can and will happen after the issue is taken care of.
A closed account, however, is not able to be opened back up at all.
A bank must receive approval before closing an account, providing adequate evidence for why the account should be closed.
Once it is closed, they will not cooperate or work with the account holder at all.
A suspension, or restriction, on an account, can limit the use of the account.
The account holder could lose the ability to withdraw money or be given a limit on the number of transactions able to be made.
Keep in mind that a bank can close or freeze a business account as well as personal accounts.
How to Unfreeze a Bank Account
It is important to point out that while a bank account is frozen, the account is still able to receive incoming payments.
The ability to withdraw or transfer money is not available while an account is frozen.
If your account is frozen, the first thing you must do is find out why it was frozen to begin with.
Before the account is frozen, the bank will send a notice.
Once you’ve been informed what the reasoning behind the account being frozen was, then you can assess the actions needed to unfreeze it.
If your account was frozen due to unpaid debt
The credit card company can potentially take the money they are owed from the frozen account.
There is not much that can be done if this is the case.
If there is not enough money in the account to pay the debt, the creditor could levy for the rest of the money.
At this point, if necessary, you could file for bankruptcy.
Filing for bankruptcy will put a halt on all collection actions.
This is an action that should really only be taken if it is your only option.
Be aware that filing bankruptcy will not automatically unfreeze your account.
You must show documentation of the filing to the necessary people to unfreeze the account, and remember that you will not be able to withdraw money once you file for bankruptcy.
If the debt is not drastic enough where you need to take action like filing for bankruptcy, now is the time to settle that debt with the creditor.
This will vacate the judgment against you which will ultimately unfreeze your bank account.
If your account was frozen due to suspicious activity
You can just give your bank a call and should be able to clear everything up fairly quickly.
Typically it was due to unreported future activity abroad, a stolen card, etc.
Generally speaking, this one can be cleared by just answer a few security questions, delivering verification codes, digital 2-factor authentication, or some forms of ID.
Most of the time if your account was frozen, a visit to your bank can be the best way to help clear things up, that way there is clear communication.
In odd cases, your account may be frozen due to suspicion of the more serious crime of fraud.
If you haven't been proven to be fraudulent but have simply been flagged for it, you won't incur a suspended or closed account status.
Fraud-based freezings, however, may require some legal disputes before any judgment can be made.
You may want to familiarize yourself with some of your rights if this happens to you.
How You Can Prevent Future Freezing of Your Bank Account
Avoiding the possibility of your bank account being frozen may seem simple enough, but some things may unexpectedly happen right under your nose.
Using your account correctly and safely is the best way to prevent future freezing of your account.
Do not ignore calls from debt collectors and keep up with your credit bills as much as possible.
If you owe the bank money, do not keep an account open at that bank.
Open a new account at a new bank. It is a better idea to keep your personal accounts in a bank that you do not have a lending relationship with.
In summation, here’s a list of the best ways to prevent future freezing:
- Talk to a lawyer (relevant for business accounts mostly)
- Do not ignore debt collectors.
- Pay your debts or contact your creditor to come to some payment agreement.
- Use different banks for personal and business accounts.
- Pay attention to your bank statements to ensure there is no fraudulent activity.
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