Protect Money from Bank Seizures

Is my money safe? This is a common question leading many to analyze whether to keep their checking or savings account with the bank that also provides their credit card. There are definite advantages to having the accounts linked, the ease of simple online payments being one of them. At the same time, promises of appealing rewards in return for our loyalty to their products persuade us that keeping everything in one place is a good idea. And yes, it can be… up to a point.

Banks have their own interests firmly in mind when they encourage you to use all of their services. For you, the risks of having the accounts so closely linked become greater if you start to have financial problems. For example, if you start to have difficulty paying your credit card bill, your bank can take control of every other account you have with them and the money stored within them.

Despite the fact that banks are not legally permitted to freeze your checking or savings account when you default on your credit card payments, it is not uncommon for rules to be broken or manipulated in such circumstances. After failing to pay their credit card bill, customers have found that their checking account has been mysteriously frozen and funds taken without permission.

If you’ve been unfortunate enough to experience this, you do have the legal right to sue the bank for unlawfully freezing your accounts. Still, this route is a long and difficult one. A more desirable and simpler course would be to avoid this scenario completely. How? Move your money!

Where do I move my money?

In order to reduce the risks mentioned above, it’s important not to move your money to an account linked to your social security number. An easy option is to open an LLC or small business account as these are registered using a unique tax identification number and not your social security number.

It’s important to note that it would be prudent to choose a different bank to the one that supplied your credit card. Although this new business account is not linked to your social security number, it will have your name associated with it. This may lead to problems when it comes to any credit card debt you may have. Therefore, it would be best to create the new business account with a completely separate bank.

A second option is to move your money to a friend or relative’s bank account. Needless to say, the person you chose should be a trusted associate and someone unlikely to take advantage of your situation. If you choose this option, it can present some inconveniences such as dependance on another person, and not being able to sign checks or have an ATM card.

Alternatively, some consumers have found that putting their money in a trust has worked effectively. Setting up and moving money to a trust may be slightly more complicated than the other options mentioned but it might be worth investigating all the same. Ultimately, as long as your money is in an account that doesn’t have your social security number attached to it, it is much safer.

In summary, if you are fighting credit card debt with a bank that also provides your checking and savings account, it’s vital to move your money without delay. Wherever you choose to move your money, make sure it is to an account that is not associated with your social security number. This could be 1) a business account, 2) a trusted friend or relative’s account or, 3) a trust fund. Choose the best option for you personally, but be sure not to leave your money with the bank seeking to collect your credit card debt.

Don’t get complacent. If you think there’s no real risk, think again. The banks have rights and they’re not afraid to use them!

Right to “Set-off”

The reason this is so urgent is because banks will pursue that debt until they collect in full. According to the law, they are permitted to collect the debt amount from any other account you hold with them. This is called their right to “set-off” accounts; it’s their right to pay off your debts with money from your other accounts in their bank.

You may find something in the small print that explains:

The Bank may, without notice, set off a debit balance on an account against any account with a credit balance or held by the same account holder.

They can and they will do this ‘without notice’ and without a second thought.

To illustrate the gravity of the situation, imagine the scenario: you have done your banking with the Bank of America for 15 years. You have an active checking account and you have built up a good reputation and relationship with the bank. During this period, you were also issued with a credit card with a credit limit of $30,000, which you promptly pay off each month. Also with the Bank of America, you opened a savings account for your kid’s college fund and over the years you have painstakingly saved $35,000. Things are going pretty well and your family feel secure. That is until you get into a bad accident.

The resulting medical bills are immense and you use your credit card to pay them. On top of that, during your lengthy recovery, you’re unable to work. It soon becomes clear that there’s no way you can keep up with the monthly credit card repayments and you begin to default. After the Bank of America fail to collect the debt routinely, they see that the money is actually sitting in your savings account; they use their right to set-off your accounts, taking the money from your savings account and wiping out your kid’s college fund.

Can you imagine how devastating that would be?

Banks have no interest in your personal mitigating circumstances. They are not concerned about what state they leave your family in. They want your money and if it’s sitting right there in their bank, they will take it.

However, the right to set-off accounts is only applicable when all of the accounts are maintained by the same establishment. So, the risk of this happening can be easily avoided by moving your money out of the bank that provided your credit card, especially if you are disputing unpaid debt. Protect yourself, and your future by transferring your money to a different account. Act quickly and get one step ahead of your bank, who could at any moment exercise their right to collect your hard-earned money from your other accounts.