What Happens When Your Bank Account Is Frozen: A Personal Story and What You Need to Know
In June 2024, California-based Patelco Credit Union members woke up to find they couldn’t access their bank accounts. Not only could they not access information online, but they were also unable to make transactions on their accounts.
That meant no direct deposits, debit card transactions, or transfers.
It was soon revealed that the credit union had been the victim of a ransomware attack. For the next two weeks, customers continued to be locked out of their accounts, although they gradually became able to make limited transactions until the system was completely restored.
While a story like this may appear to be a distant problem that won’t hit home, keep in mind that this could happen to anyone, and if you’re unfortunate enough to have your account frozen, you need to be prepared.
This page provides that preparation with expert tips and a first-hand account from someone who went through the challenge of having her bank account frozen. Also, you will find information on common reasons these freezes occur and what you can do to decrease the likelihood of experiencing one.
A Personal Experience With a Frozen Bank Account
In 2011, Jessica Wright, CEO of Buy My Home Chattanooga, and her husband were excited. After years of saving money, they were finally able to make a down payment on their dream home and start the next chapter of their lives.
But that excitement soon turned to panic when she realized that their bank account had been frozen the next day.
“Panic hit me hard because I realized I couldn’t access any funds just days before the closing date, and I was pretty anxious that something bad had happened,” said Wright. “I thought about all the worst-case scenarios and prayed the seller would give me some time to work through this because we were competing against a few other offers. I called my bank, and they explained that the large transfer had raised a red flag for suspected fraud, and my heart sank.”
The hoops Wright had to jump through to get her account unfrozen didn’t help the pain in her heart either.
“Working with the bank kind of felt like pulling teeth,” she explained. “First I called the general help line and kept getting stuck in a loop with the robot, and asking for an agent didn’t help. So I hung up and called the personal checking line, and they transferred me to the general fraud department. The fraud department had to transfer me to a manager. I probably spent over an hour with this whole ordeal.”
But luckily, after all this hard work, this story had a happy ending.
“My quick thinking helped get it settled within a week, and we were still able to buy our dream house,” Wright said.
Why Do Bank Accounts Become Frozen?
The good news is that you’re unlikely to experience a frozen bank account. When we handle day-to-day transactions, we usually have nothing to worry about. However, some triggers can make a bank take this extraordinary step, so it’s worth being aware of them.
Suspicious Activities
As Wright found out the hard way, suspicious account activity is one of the major reasons a bank account will become frozen. Although it’s a frustrating experience, she urges people to remember that the bank is not doing this to hurt them but to protect them and their funds.
“I would say to remain calm and understanding,” she advised. “The banks do not have malicious intent by freezing your account. It’s likely just suspected fraud or something else. Call the fraud department at your bank and try to talk to a manager as soon as possible to get it solved.”
In Wright’s case, one unusually large withdrawal was the trigger to freeze her account. But it doesn’t always happen that way, says Braden Perry, a partner at Kansas-based Kennyhertz Perry Law.
“A lot of times, the warning signs will be multiple, usually smaller, transactions from overseas locales to essentially ping the account to make sure that they’re getting full access to what they want to do. This is followed by obviously larger withdrawals that are outside the norm when it comes to that account,” Perry said. “Banks have a number of methods and tools to review transactions, and if things seem out of whack, then they’ll be dinged on a report, and someone will review the report and potentially freeze an account to determine whether it has been taken over by someone. The bank will likely contact the account holder, make sure that they know the activity in the account, and if it has been compromised, then they’ll close it. If not, then they’ll reopen it for the account holder.”
However, don’t wait for the bank to catch suspicious or fraudulent activity. Check your accounts on a regular basis to make sure there are no transactions you didn’t make.
Court Orders
When someone is involved in a lawsuit and has a judgment against them, there may be a court order to freeze their bank account to prevent them from quickly moving their funds to another bank. This can be helpful if you’re involved in a lawsuit against a company because it makes it more likely that you’ll be able to get the judgment you deserve if you win your case.
“This is essentially for large judgments. Many times, there’s a lot of whack-a-mole where the companies are moving their accounts to a number of different places,” said Perry. “If they know the bank will receive a court order for a garnishment or a lien, they’ll just move the account before the bank can shut it down. This is a way for banks to prevent that.”
Overdue Debts
If you take out a mortgage from the same bank where you have your checking or savings accounts, pay close attention to the terms you agree to. If you fall behind on your mortgage payments, your bank may be able to freeze your accounts to get your loan up to date.
Luckily, if you fall on hard times and have trouble making your mortgage payment, the bank isn’t quick to take such extreme measures. You’ll get notices warning you of this possibility to ensure the relationship isn’t immediately fractured.
“A bank will let you know that you’re delinquent and need to pay. Many times, you get a second and potentially third notice before they actually freeze your accounts because it almost always eliminates that person as a banking customer if they have to do that,” said Perry. “Obviously, you want to keep customers as long as possible, so you give them the opportunity to pay the debts as they can before you go in and freeze accounts to take the money. They’ll certainly let you know many times before they have to do that, and that’s kind of their last recourse to make themselves whole.”
Is There Any Way to Avoid Your Bank Account Being Frozen?
Although multiple scenarios may lead to your bank account being frozen, there are also things you can do to prevent this from happening.
One of the biggest ways to avoid this problem is through open communication with your bank. Although you may not think your bank knows—or even cares—about the details of your regular spending habits, if there’s a big change in your account activities, the bank will be sure to notice.
“You may move from California to New York and then all of a sudden, you’re pulling money from ATMs in New York as opposed to where you generally were pulling them from. A trigger could hit one of the banking reports that these may be unauthorized transactions, and so the bank may shut you down without you knowing it,” Perry said. “So it’s always good to update your personal information if you have any life change—if you move, get married, get divorced, those types of things.”
But communication with your bank should not be limited to the big events in your life. Perry says that even smaller situations that lead to changes in your spending are worth notifying your bank about.
“It’s also good to let the bank and credit card companies know if you’re traveling abroad,” he said. “The last thing you want is to be stuck with frozen bank accounts and not being able to pay for anything because you didn’t let your bank know that you’re going to be traveling to Mexico for a few weeks.”
Easily Compare the Best Checking Accounts Online
Compare rates, fees, accessibility, customer service, and more to find the best checking account for your needs.
What to Do If Your Bank Account Has Been Frozen
When you’re handling your finances from one day to the next, the last thing you’re probably thinking about is what you’d do if your bank account becomes frozen. But if you find yourself in this stressful position, you need to know how to handle it effectively. The following are some steps you can take.
Have a Backup Bank Account
One important way to navigate having your bank account frozen starts before it happens.
Wright found that having another bank account made her experience go much more smoothly. Although this may never actually happen to you, maintaining an account at another bank will make it easier if the worst happens.
“I recommend that you have a backup bank account because sometimes the banks won’t be able to unfreeze your accounts as quickly as they did for me,” Wright said. “Also, by having a backup bank account, you can ensure you’re covered in financial emergencies or if you need to pay for rent, utilities, or groceries.”
Don’t Panic
Having your bank account frozen is undoubtedly a stressful experience. However, it’s important to remain calm as you work to resolve the problem so you don’t make rash decisions that make things worse.
“You may say things you will regret later to the poor individual who happens to pick up the phone in the situation. There’s a reason behind what the bank does, so the way to resolve it is to figure out that reason,” Perry said. “Stay calm because your money is still there; it’s just a matter of trying to figure out how best to manage the situation.”
Contact the Bank
After you’ve calmed down, contact your bank immediately to begin getting to the bottom of the freeze. Since you may not have any information about why it happened, you want to get as much clarity from the bank as possible and avoid making any assumptions.
“It’s always good to reach out and let them know that you’re aware of the situation. If there are underlying issues that need to be resolved, the bank may be able to tell you the reason the account is frozen,” said Perry. “Don’t assume that you’ve done something wrong. It may just be a misunderstanding. It may be a temporary issue. The best course of action is to be transparent and communicate with the bank.”
Handle Legal Issues
You may think it would be obvious if you have legal issues that would lead to your bank account being frozen, but according to Perry, that’s not necessarily the case. As a result, it’s a good idea to do a search to find out if you have any judgments against you that you’re unaware of.
“Many times, obviously, people will know if they’re being sued, but what they may not know is if they’re in violation of any judgments,” said Perry. “Sometimes there are child support issues or payments to ex-spouses, those types of things, which may fall under the radar. Instead of getting notice on an issue, the opposing party will just file a lien or a judgment, and you may not know that that has actually happened until you look around.”
Tie Up Loose Ends Before Closing Your Account
Your first reaction to having a bank account frozen may be to take your business elsewhere once you have access to your funds. Although the experience may have you rightfully thinking about banking alternatives, it’s important not to be hasty. If you’re going to move your money to a bank, be sure to tie up all of the loose ends first to ensure a smooth transition, and so you don’t end up with another problem on your hands to deal with.
“If you are unsatisfied with the bank and its response, certainly you’re right to go somewhere else. But a lot of times, once the issue is resolved, people will take all their money out and go to another bank, not knowing that they’ve got an automatic payment or outstanding checks on their account,” Perry said. “Even if you weren’t in financial distress before, it can certainly put you in financial distress if you don’t think through those types of things. It’s good just to get these things resolved to make sure that you’re closing accounts down properly.”
While having a bank account frozen can be frustrating and even frightening, it doesn’t mean you can’t solve the problem and regain access to your money.
The key is to be calm and as proactive as possible as you work with the bank to get the account reopened.
Keep in mind that the bank isn’t intentionally trying to hurt you and your finances, and the company is just as interested in rectifying the situation as you are.
