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One fine day you may wake up and discover all your bill pays are not just going through, the schedule transfers to your other investment accounts failing, or your systematic investment plans are failing.
You call up your bank and find an answer, a reason code ’16’ which is nothing but ‘account frozen’ status. There is no immediate way to recover from this set back, there is no way to not become delinquent on your credit card bills and utility bills. It is deadly situation, handle with care and take prompt action, without wasting time.
Better, read the mailers from your bank and take action before it’s too late. I learned it in hard way.
What prompted me to write this blog, is, a recent turmoil in our financial life. For some reason our one and only checking account with BofA was frozen. It was not our fault, but , apparently a fault from the bank itself, perhaps, lack of discipline from one of the clerical staffs, or probably a flaw in their software system.
One bright and sunny day, in 2011, our checking account got frozen, no alert no notification, just return payment on all by credit card auto payments. It took a couple of phone calls to realize the reason, it was deadly ’16’. A few rounds to the local branch finally resolved the issue, but, it took more than 3 days.
By this time I was already past due (since my credit card bill payments are set up on one day before the due date) on three of of our credit card accounts. I was assessed late fees and return payment fees, apart from the nastiest one, the possible negative credit bureau reporting. I was searching for a solution, a way to revert all these.
I started posting questions on forums and to my seasoned friends. One of my colleagues, who faced the situation herself, suggested me to contact bank and demand a letter stating that my bank account was frozen due to bank’s fault.
Incidentally her account was frozen due to someone else taking out money from her bank account with a wrong check, yes this happens too!
Finally, after much persuasion, I managed to get the letter from BofA, and faxed it to AMEX, Chase and Citi, they all were kind enough to revert fees and promised me over phone that no negative report shall be filed.
For next few months I closely monitored the credit report and found all three of them reported my as ‘Current’ for that particular month.
Important lesson here is, do check your financial accounts periodically to prevent any such situation to occur. Banks are required to issue advanced notifictaion to you on any change in your account status, They are required to mail you in writing, so, do take time to read mailers from your bank.
Still, if it happens, do take immediate action and do not let your financial health suffer. Another important learning is, It is OK to take opinions of others on personal finance, when you don’t know what to do. There shouldn’t be any shame in asking for help, even in your financial matters.
Since then, I now have a second checking account with Chase. So, I have one less thing to worry about my finances now after this terrible experience.
Readers, have you faced a similar situation when you had your checking account frozen? Do share your opinion.
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Fortunately, nothing like this has ever happened to me. However, if it does, now I have a good idea of the actions I should take to quickly address the situation. One thought I had was that there might be value in having a secondary account – something akin to an emergency fund – in a separate account with a different bank, providing a means to get immediate access to cash to pay the most critical bills if nothing else.
All of our day-to-day finances revolve around one checking account. We can fall back to using one of our investment accounts in which we have regular checks, so I am not too worried. I also do not try to float the payment until the day before the due date to pay bills. This might be a good strategy if interest rates were high, but current rates don’t earn much over the course of a few weeks. You never know what situation might crop up. I mostly pay online as soon as I get notice that a bill is due.
What a rotten experience. But glad to see a happy ending. In a world of automation it’s easy to fall prey to not checking account activity. But it’s important enough to make it a priority. After all, it is humans that are behind the machines. And we all make mistakes.
My first response would be to freak out if this happened to me, then give the bank a call. I’m fortunate that this hasn’t happened and I’m also glad that I have more than one account to pay bills with. I don’t think I’d want every single dime I own in one account.
That sucks! I would call my bank right away and complain bitterly.
Actually, I had to do that when I was on vacation and couldn’t withdraw money from the ATM. It turned out that my card was expired…
This is why it may be a great idea to setup a Zero Balance Account or a Consolidated Accumulation and Distribution Account.
Where you can have all deposits and sources income go, and pay for bills only using the money in the account.
You can even get a credit line for it to help protect against fees and other temporary fund issues. Such as a recent stock purchase or other invest exceeding your initial amount.
I saw someone above mention a secondary account. That’s not a bad idea.
What scares me is I’ve set everything up to pay pretty much automatically.
My luck, I would find out there’s a problem when the lights got cutoff.
Yep, while a secondary account would help with access to cash immediately, I suppose it wouldn’t be the best answer for scheduled payments that aren’t made, unbeknownst to the account owner. I don’t automatically schedule payments as I’m not a fan of having others reach into my account. I would much rather pay at my discretion.