In America, the bank does not have to tell you why your US bank account is closed! The problem is that the reason for closing an American bank account varies from one bank to another and from one account to another, but what they all have in common is the message!
Simply,
You receive a message from the bank says something like this:
You receive a message from the bank says something like this: “Hey, we don’t want to work with you anymore, and we don’t have to tell you why your account will be closed in 2 weeks!”
Of course, the message is not literally like that😅
But I think you got the idea!
I am writing this article today because we are receiving many messages from people whose accounts have been closed and they do not have enough information about the reason for closing US bank accounts, and there is not much information about this matter from the American banks themselves!
Even if you try to contact American banks to find out reasons of closure of the bank account, you’ll never get answers.
But thanks to the experience we have gained from establishing companies in America and opening US bank accounts with various US banks, we were able to collect the things that we believe are the reason for closing the US bank account.
In this article we will talk in detail about four things:
- Types of American banks.
- Types of bank transfers.
- Alternative solutions.
- Recommendations.
I encourage you to read this article to the end if you do not want your US bank account to be closed, and if you want to know some tricks and tips on how to manage your business so that your bank does not close your account.
- Types of Banks in America
In America there are three types of banks:
- Traditional Banks
One of the first types of banks in America is the traditional banks, which some may also call physical banks.
Examples of these banks include some of the most popular American banks such as Chase Bank, Bank of America, Wells Fargo, and Citibank.
- Online Banks
The second type is online banks such as Mercury (which is not a real bank), RelayFi (also not a real bank), Highbeam (not a real bank as well). These online banks are companies that provide services and were created based on the existence of traditional banks.
- Financial Solutions
The third type is companies that offer international money transfer services, they are designed to make international cross-border financial transactions less expensive, more transparent, and more efficient.
Examples of these companies include companies such as Wise And Airwallex, which are not banks at all and they do not have banking partners, they are money transfer intermediaries, you can use them to send & receive money in dollars for your bank accounts internationally, you can also receive money in your local currency if you wish.
So, if you have a company, you can receive money in dollars, euros, or any currency you want using Wise for example, depending on how these accounts are set up.
Types of Bank Transfers
Most banks don’t care much about the money deposited into the account. When you sell what is worth $100 million, for example!, on Amazon or through Stripe, the money goes into your account.
Banks almost never suspect the money coming into the bank account in this way, because they know the source of the money coming into the bank and because these sources are reliable.
But on the contrary, banks question and scrutinize the money leaving the bank account, sometimes they ask the account holder to confirm the transfer.
Some banks may request permission from the account holder before the money transfer process can take place.
Some banks may request permission from the account holder before the money transfer process can take place.
Unless the cash amount is large and in batches and you don’t do a lot of cryptocurrency transactions; your bank account will not be subject to scrutiny or being put under review.
Let us assume, for the sake of argument, that you received a transfer to your bank account worth one million dollars, for example!, from Silvergate Bank, the bank that is very famous for dealing in encrypted currencies or so-called crypto currencies, the bank may ask you about it.
This is also the case with the banks that are well-known to deal in cryptocurrencies.
This does not mean that they are bad or good banks or that dealing with cryptocurrencies is a bad thing or anything like that, not at all!
Here I am just stating the fact that banks consider the risks related to this type of cryptocurrency to be considered higher than other risks.
In general, the money received is not a problem, but money being withdrawn from the account may be a problem.
Some of our clients have transferred money to Panama, and we believe this is why their bank accounts have been closed in the past.
This does not mean at all that there is anything wrong with sending a wire transfer to a personal account you have in Panama, and we do not think there is any problem with that.
But when you perform certain transformations in a certain way, it raises your risk level with the bank, then the bank can decide to close your account or not.
What to do then, what is the solution to the problem of money transfer Internationally?
The solution is to use intermediary companies like Wise or Airwallex, or use a money transfer company to transfer your money internationally instead of sending a direct transfer from one bank to another.
Unfortunately, some online banks like Mercury and Relay have some restrictions on their international transfers, so when you want to do a bank transfer through them, you won’t be able to send an electronic transfer from your Mercury business account to a personal bank account in Panama easily, and the reason for this is that banks in Panama will reject it most of the time because it is a correspondent bank.
However, there are different levels of banking services when it comes to international transfers, and all banks have their own rules that they follow.
What is the solution?
The solution is not to use a bank transfer. Instead, try to use an intermediary to pay via bank transfers.
I will explain more about this later in this article.
Tips to avoid closing your bank account
Even if the reason for closing the American bank account is not clear to you, there are three very important tips that you must apply in your work in order to avoid this closure from occurring.
- Use one bank account to pay
If you have four bank accounts and you are purchasing goods from a merchant in China, do not send money transfers to China to pay that merchant from each account separately! Use one account to pay that merchant.
If there is any problem with the bank account, just close this account and you can use the other accounts!
We always emphasize on this advice and recommend it to our clients.
- You must have multiple bank accounts
Even if you’re not doing anything suspicious according to the bank policies, something could happen and your account can be closed, and you’ll never know why.
But this will not cause a problem if you have other bank accounts.
- Don’t withdraw too much cash
In general, it is not a problem if you have to withdraw cash.
We have customers who use their cards from online banks all over the world and withdraw cash without problems.
But be careful not to withdraw too much cash!
Some banks have limits on cash withdrawals, and we haven’t really seen a lot of issues with cash withdrawals, but we have some accounts experienced problems after a number of large cash withdrawals without telling the bank.
What are the types of transfers in US bank accounts?
In the US bank accounts you have the following types of transfers:
- Account deposits, which are a regular transfer of bank cash deposits from one account to another, for example a check.
- Bank transfer, which is when you transfer money from one account to another.
- Settlements from processing a credit card transaction such as a payment from a credit card to a bank account and other types of transactions.
Let me remind you again!
Money coming into your account is generally not a problem, but money going out of your account may be, but it mostly depends on where the money is being sent to.
Another thing that banks don’t like either is the transfer process that lead to empty accounts.
For example, if you have $100,000 coming into your account every day, and you immediately send it all to another account; banks do not like to see any account with a zero balance! Especially if there is money coming in and out and there are big numbers!
Banks want you to keep some sort of balance in your account, and have a lot of actual small business transactions, because they make money that way, and we’ve already seen that accounts that do these things work better.
- Alternative Solutions
There are two helpful solutions that you can apply to reduce the possibility of closing your bank account:
- Money brokers
Alternative solutions for sending money internationally are money brokers, as I said earlier, like Wise and Airwallex, which are companies that aim only to send money internationally in different currencies between different types of accounts.
If you are sending a lot of money abroad, it makes sense to use these types of money intermediaries, and they are probably cheaper.
So, this way, from Mercury or Chase for example, you just send an EFT or ACH from a US bank account in the company’s name to another US bank account in the company’s name as well, and then you send the money to China or to Malaysia or wherever you send it to pay companies or people who provide you the services and goods.
Quick note: ACH is a type of payment that works by moving money from one bank to another electronically, without physically exchanging currency, and this is how I set it up to reduce the risk of my US accounts being closed, because I will always need to pay money to people and companies outside the US. It’s all about the two main rules for any business when it comes to payments:
Number one: You must find a reliable way to receive your money!
Number two: You must find a reliable way to pay for the goods and services you use in your business!
Meaning, if you cannot get your money, you will not be able to pay your employees and suppliers, and you must always make sure that your bank accounts are open to receive and send money!
- Open a US bank account
Here we need an example to know the importance of this matter:
Suppose you have a foreign company in Türkiye, for example, and you have a Wise account for this company.
Another workaround would probably be opening a US bank account in US dollars for that Turkish company, then things will be easier on the Turkish side.
This means you can send money from the US bank account of the Turkish company to another US account.
But the Turkish company also has its Wise account which converts dollars into Turkish currency and places this money in a Turkish bank account.
From the perspective of the Turkish state to the American bank: they see a process of transfer from an American account in the name of the company to another Turkish account with the same name as the company.
Meaning it is Money transfer process from one of the company’s bank accounts to another company account in Türkiye.
So, it makes sense if you have a company in a foreign country to consider opening a Wise account in US dollars, so that when you move money to your country, it is a business-to-business transfer, which may also have better tax implications.
- Recommendations
In general, I have six important recommendations for every business:
- You must have multiple bank accounts.
- You must have multiple ways to receive money.
- You must have multiple ways to send money.
- You must warm up these accounts, more on that later.
- Determine the number of daily bank transactions.
- Make proper use of online bank accounts.
I know that opening bank accounts is annoying, but most of these accounts will stay open without fees if you put a little money into them, and you can keep them open that way.
But you must warm up these accounts.
What is the account warm up process?
It is the process through which you prepare your bank account day after day to increase the value of financial transactions that you can do within this account.
Meaning: do not open an account and put a million dollars in it then send $900,000 out of it!
You must warm up this account otherwise this may be a reason for closing the US bank account.
Use it for some time with acceptable financial transactions and increase it gradually, then you will have a long transaction history with the bank.
For example, if you are new with PayPal, you must really warm up your account until you have a long transaction history with them, because if you make many transactions at once, they will close your account every time.
PayPal in particular has no tolerance for these matters at all and we have a lot of people using local currency PayPal accounts to run their e-commerce businesses all over the world. We highly recommend them to start with small transactions first, then little by little they can raise the value of these transactions, until PayPal and the bank become accustomed to transferring transactions related to your business and company.
The account warm up process will give you a better chance of keeping the account open, especially when it comes to processing payments.
If you need help opening companies, opening a bank account for your company, or need to know more information, you can contact our team for free and we will provide you with all the necessary support.
