Not directly, but watch out for these ways it could indirectly impact your credit
Lock Stock / Getty Images
Fact checked by Brendan HarknessFact checked by Brendan Harkness
The act of closing a bank account doesn’t directly impact your credit. So, whether you’re switching to a new financial institution or just consolidating your finances, you won’t necessarily incur any negative credit score effects.
However, there are a few steps you should take before canceling your account to ensure you don’t indirectly hurt your credit. Here’s what to do.
Key Takeaways
You can close your checking account with a bank or credit union at any time. Traditional credit scores do not take checking accounts into consideration. Closing a bank account won’t affect your credit score unless you miss payments to other accounts or have a negative balance.
When Closing a Checking Account Could Affect Your Credit
Typical credit scoring models, like FICO and VantageScore, don’t consider your bank accounts when determining your credit score. Bank accounts don’t appear on your credit reports from the three major credit bureaus.
“A checking account does not have any direct impact on a person’s credit score or credit file, because checking accounts are not considered lines of credit and do not involve borrowing money,” explained Michael Collins, a chartered financial analyst and founder of WinCap Financial.Â
However, closing a checking account can indirectly hurt your credit score in some cases. For example:Â
Your account was linked to a credit card or an outstanding loan: Many people use their checking account’s automatic payment settings to send payments for credit cards, student loans, and other forms of credit. But if you close your checking account before setting up autopay to come from another account, you might miss a payment. And a single missed payment can significantly affect your credit score (although creditors typically take at least 30 days to report a payment as late, so you have time to make it up).The bank closed your account because of an unpaid negative balance: If a bank or credit union closes your account due to consistent overdrafts or an ongoing negative balance, it may pass that debt to a debt collection agency. If that occurs, the debt collector may submit the outstanding debt to the credit bureaus, which will affect your credit. Plus, this delinquency will remain on your credit reports for seven years.Â
If a bank or credit union closes your account due to suspected fraudulent activity or because of an unpaid negative balance, the institution will report that information to checking account report companies like ChexSystems. Negative information on a ChexSystems report doesn’t affect your credit score, but can make it difficult to qualify for a new checking account.
If you’ve had past issues with negative balances and closed bank accounts, you may need to open a second-chance bank account. These basic accounts are designed for people who do not qualify for traditional checking or savings accounts and can help you repair your finances.
How to Close a Checking Account So Your Credit Isn’t Affected
If you’ve decided to close a checking account, follow these steps to protect your credit.
Review your account agreement: Before closing an account, review your deposit account agreement or fee schedule. The agreement will outline the requirements for closing an account, as well as any associated fees. For example, some banks charge a fee if you close your account within a few months of its opening date. Make sure your balance is positive: If your account is in the red, deposit enough to bring it back to $0 or positive.Check your statements: Review your bank statements from the past three to six months and note any recurring payments, such as utility bills or payments on credit cards or loans. Create a list of any accounts linked to your checking account so you know what to update, such as your credit card company, mortgage lender, auto loan servicer, or student loan servicer.Open a new checking account: Unless you already have another checking account, you’ll probably need to open a new one. Consider your options carefully—some banks offer bonuses for opening a new account.Update your automatic payment information: Update your payment information with the accounts you found earlier. Add your new checking account details for future payments. While you’re at it, update your direct deposit information with your employer so your paycheck isn’t delayed, if applicable.Submit your closure request: Some banks allow you to close an account online, while others require written notification or a phone call. Review your deposit account agreement to find out your bank’s requirements. Ask for a written confirmation: Request confirmation that the account has been closed via email or postal mail for your records. The confirmation can come in handy if there are disputes about the bank account’s closure date.
Factors That Affect Your Credit Score
There are several credit scoring models, but the FICO score is one of the most common. It takes the following factors into account, weighing some more heavily (giving them a bigger impact on your credit score).Â
Payment history (35%): The biggest factor affecting your credit score, your payment history shows creditors whether you’ve made your past payments on time. Amounts owed (30%): This factor considers how much of your available credit you use, a measure known as credit utilization. If you use a larger percentage (by maxing out your credit cards, for example), your score can fall. Creditors worry you may be overextending yourself—and might have trouble paying back all of the debt.Length of credit history (15%): The longer you’ve had accounts open, on average, the better you’ll do in this category.Credit mix (10%): A mix of credit accounts is ideal, including revolving credit, loans, and mortgage debt. However, your credit mix has a smaller impact on your credit score than other factors—you don’t necessarily need one of each type of debt to have great credit. New credit (10%): Taking on too much new credit at once can reduce your score. Creditors may see that and be concerned about your ability to afford your payments.Â
You can build and improve your credit by making your payments on time, keeping your credit card balances low, and limiting new credit applications.Â
Important
In 2018, FICO announced the launch of a new credit score, the UltraFICO Score, which was designed to be more comprehensive than other scoring models. It takes into account consumers’ checking, savings, or money market accounts, but it’s not yet widely available.
Frequently Asked Questions (FAQs)
Can I Close My Checking Account Whenever I Want?
As long as your account is in good standing and doesn’t have a negative balance, you can close your checking account with a credit union or bank at any time. However, some banks do charge early closure fees if your account has only been open for a short time, such as 90 days.Â
Does Opening a New Checking Account Affect My Credit Score?
Checking accounts aren’t forms of debt, so they aren’t reported to the major credit bureaus, nor do they affect your credit score. Banks do report new accounts to checking account reporting companies like ChexSystems, but this information doesn’t impact your credit.Â
Is My Credit Affected If My Bank Closes My Checking Account?
Whether the account closure affects your credit depends on the circumstances of the closure. If your account was closed for inactivity but didn’t have a negative balance, there will be no impact to your credit. But if your account was overdrawn and had a negative balance, the bank may send the debt to collections. If that happens, it can have a significant effect on your credit.Â
Does Having Several Checking Accounts Help My Credit Score?
Checking accounts aren’t included in the calculations for traditional credit scores, so having several checking accounts doesn’t hurt or help your credit score. However, there may be some indirect benefits to certain accounts.Â
“Features such as bill tracking and credit monitoring tools offered by some banks can also help individuals stay on top of their finances and make timely payments, which in turn, can positively impact their credit score,” said Collins.
What Are Some Alternatives to Closing an Inactive Checking Account?
If you don’t use an account often but don’t want to close it, you have some options. If you’re looking to cut down on monthly fees, you could ask your bank if you can switch to another account at the same institution with lower or no fees.Â
You could set up a very small recurring transfer or payment to keep it active. Or, you can leave the bank account untouched until it’s needed. Just be aware that some banks will eventually consider your account dormant or inactive, meaning there has been no activity for a certain amount of time, and they may close it. If that occurs, the account could be considered abandoned property, and you’d have to file a claim with your state’s unclaimed property office.
The Bottom Line
If you want to close a checking account to avoid costly fees or to switch to a bank that offers more convenience, know that closing the account won’t directly affect your credit. However, to ensure there is no damage to your credit score, be sure to update all of your automatic payment settings and properly notify the bank of your desire to close the account.Â
If you’re looking for an account with no monthly fees and other perks, check out our picks for the best free checking accounts.
Read the original article on Investopedia.
  Not directly, but watch out for these ways it could indirectly impact your creditÂ
Amazon.com: Its Role in the U.S. Industry
Introduction
Amazon.com, often simply referred to as Amazon, has transformed from an online bookstore into a colossal global conglomerate that has fundamentally altered the landscape of retail, technology, and numerous other industries. Founded in 1994 by Jeff Bezos, Amazon’s rapid growth and diversification have made it a central player in the U.S. economy. Its impact is felt across various sectors, including e-commerce, logistics, cloud computing, entertainment, and even artificial intelligence. This article explores Amazon’s role in the U.S. industry, examining its influence, achievements, and the challenges it faces.
The Rise of Amazon.com
Origins and Early Growth
Amazon began as an online bookstore in Bezos’s garage in Bellevue, Washington. The vision was simple but revolutionary: to create an online platform where people could buy books. Bezos recognized the potential of the internet to disrupt traditional retail and chose books as his starting point due to their wide appeal and ease of distribution. By offering a vast selection and competitive prices, Amazon quickly gained a foothold in the market.
The company’s initial public offering (IPO) in 1997 marked the beginning of its journey toward becoming a dominant player in the U.S. and global markets. Amazon’s early success was driven by its focus on customer satisfaction, an extensive inventory, and a commitment to fast and reliable delivery. This focus laid the foundation for its expansion into other product categories and services.
Diversification and Expansion
Amazon’s diversification strategy began with the introduction of new product categories, such as electronics, toys, and apparel. This move positioned Amazon as a one-stop shop for consumers, significantly expanding its customer base. The company also introduced its marketplace platform, allowing third-party sellers to offer their products alongside Amazon’s own inventory. This not only increased the variety of products available but also created a new revenue stream for the company through commissions on sales.
One of the most significant milestones in Amazon’s diversification was the launch of Amazon Web Services (AWS) in 2006. AWS provided cloud computing services to businesses, enabling them to rent computing power and storage rather than investing in expensive infrastructure. This service quickly became a cornerstone of Amazon’s business, contributing significantly to its profitability and establishing Amazon as a leader in the tech industry.
Amazon’s Role in E-Commerce
Transforming Retail
Amazon’s impact on the retail industry cannot be overstated. It has revolutionized the way consumers shop, shifting much of retail activity from brick-and-mortar stores to online platforms. The convenience of shopping from home, coupled with Amazon’s vast selection and competitive pricing, has led to a fundamental change in consumer behavior. This shift has forced traditional retailers to adapt, leading to the rise of omnichannel strategies that integrate online and offline sales.
The concept of “one-click shopping,” patented by Amazon in 1999, further streamlined the online shopping experience. This innovation reduced the friction in the purchasing process, contributing to higher conversion rates and reinforcing Amazon’s dominance in e-commerce. Additionally, Amazon Prime, launched in 2005, offered customers free two-day shipping and other benefits for an annual fee, further solidifying customer loyalty and increasing the frequency of purchases.
Impact on Small Businesses
While Amazon has provided opportunities for small businesses through its marketplace platform, it has also posed challenges. On the one hand, small businesses gain access to a vast customer base and the logistics infrastructure that Amazon offers. On the other hand, they face intense competition, not only from other third-party sellers but also from Amazon itself. The company’s ability to undercut prices and its control over the marketplace platform have led to concerns about fairness and market power.
Moreover, Amazon’s algorithms and data-driven approach to retail have raised questions about the transparency of how products are promoted and priced on the platform. Small businesses often struggle to achieve visibility without spending on Amazon’s advertising services, which can be costly. Despite these challenges, many small businesses continue to rely on Amazon as a vital sales channel, underscoring its central role in the U.S. retail industry.
Amazon in the Logistics and Supply Chain Industry
Revolutionizing Logistics
Amazon’s impact extends beyond retail into logistics and supply chain management. To fulfill its promise of fast and reliable delivery, Amazon has invested heavily in building a sophisticated logistics network. This network includes a vast network of fulfillment centers, advanced robotics, and a growing fleet of delivery vehicles, including drones.
Amazon’s logistics capabilities have set new standards for the industry. The company has pushed the boundaries of what is possible in terms of speed and efficiency, challenging traditional logistics providers like FedEx and UPS. Amazon’s commitment to customer satisfaction has driven innovations such as same-day and even one-hour delivery in select areas, further raising consumer expectations.
In-House Logistics Services
In recent years, Amazon has taken steps to reduce its reliance on third-party logistics providers by expanding its in-house delivery capabilities. The launch of Amazon Logistics, a service that uses independent contractors to deliver packages, is a testament to this strategy. This move has enabled Amazon to exert greater control over the delivery process and reduce costs.
However, this expansion has not been without controversy. Amazon’s use of independent contractors has sparked debates about labor practices and the gig economy. Critics argue that Amazon’s business model places financial and physical burdens on its delivery drivers, who are often classified as independent contractors rather than employees. This classification exempts Amazon from providing benefits and protections typically afforded to employees, such as health insurance and minimum wage guarantees.
Amazon Web Services: The Backbone of the Internet
Dominating Cloud Computing
Amazon Web Services (AWS) has emerged as one of the most significant contributors to Amazon’s success. As the leading provider of cloud computing services, AWS powers a vast portion of the internet, supporting everything from startups to large enterprises. Its services include computing power, storage, databases, machine learning, and more.
AWS’s dominance in cloud computing has had a profound impact on the tech industry. By providing scalable and cost-effective solutions, AWS has lowered the barriers to entry for new businesses, fostering innovation and entrepreneurship. Companies no longer need to invest heavily in physical infrastructure; instead, they can rent the necessary resources on demand from AWS.
Economic Impact and Innovation
The success of AWS has not only boosted Amazon’s financial performance but also contributed to the broader U.S. economy. AWS has created jobs, driven innovation, and supported the growth of numerous tech companies. Its services have become integral to the operations of many businesses, from streaming services like Netflix to financial institutions and government agencies.
AWS’s role in advancing technologies such as artificial intelligence and machine learning has also been significant. By making these technologies accessible through cloud services, AWS has enabled companies to develop new applications and services that were previously out of reach. This has spurred growth in sectors such as healthcare, finance, and entertainment.
Amazon’s Influence on Entertainment and Media
Amazon Studios and Prime Video
Amazon’s foray into the entertainment industry began with the launch of Amazon Studios and Prime Video. These platforms have become key players in the streaming wars, competing with giants like Netflix, Disney+, and HBO Max. Amazon Studios produces original content, including critically acclaimed series like The Marvelous Mrs. Maisel and The Boys, as well as feature films.
Prime Video, available as part of the Amazon Prime membership, has become a major driver of subscriber growth. By offering a mix of original content and licensed programming, Amazon has been able to attract a diverse audience. The company’s investment in high-quality content has not only boosted its streaming service but also positioned it as a significant player in Hollywood.
Impact on the Publishing Industry
Amazon’s origins as an online bookstore continue to influence the publishing industry. The company has become the largest bookseller in the world, both in physical books and e-books. The Kindle, Amazon’s e-reader, revolutionized the way people consume books, making digital reading mainstream.
However, Amazon’s dominance in the book market has raised concerns among publishers and authors. The company’s pricing strategies and negotiation tactics have led to disputes over revenue sharing and control. Amazon’s influence over the publishing industry extends to self-publishing, where its Kindle Direct Publishing platform allows authors to bypass traditional publishers and reach readers directly. While this has democratized publishing, it has also led to an oversaturation of the market and challenges in quality control.
Challenges and Criticisms
Regulatory Scrutiny
Amazon’s immense size and influence have made it a target for regulatory scrutiny. In the U.S. and abroad, lawmakers and regulators have raised concerns about the company’s market power, labor practices, and treatment of third-party sellers. Antitrust investigations have been launched to determine whether Amazon engages in anti-competitive behavior, such as favoring its own products over those of third-party sellers on its platform.
The company’s expansion into various industries has also led to concerns about its dominance and potential to stifle competition. Critics argue that Amazon’s control over data, logistics, and retail gives it an unfair advantage, making it difficult for smaller companies to compete. In response, there have been calls for greater regulation and even the potential breakup of Amazon into smaller entities.
Labor Practices and Workers’ Rights
Amazon’s labor practices have come under intense scrutiny, particularly in its fulfillment centers and delivery network. Reports of grueling working conditions, high injury rates, and inadequate breaks have sparked widespread criticism. Workers have organized protests and strikes, demanding better pay, safer working conditions, and the right to unionize.
The company’s use of technology to monitor and manage workers has also raised ethical concerns. Amazon’s reliance on algorithms to track productivity and enforce performance targets has been criticized for creating a dehumanizing work environment. The company’s resistance to unionization efforts has further fueled debates about workers’ rights and corporate responsibility.
Environmental Impact
As one of the largest companies in the world, Amazon’s environmental impact is significant. The company’s vast logistics network and rapid delivery services contribute to carbon emissions and packaging waste. Amazon has faced criticism for its role in driving consumerism and its contribution to environmental degradation.
In response, Amazon has pledged to become more sustainable. The company launched the Climate Pledge in 2019, committing to reach net-zero carbon emissions by 2040. Amazon has also invested in renewable energy, electric delivery vehicles, and sustainable packaging. While these efforts are a step in the right direction, critics argue that more needs to be done to address the environmental impact of the company’s operations.
