Reasons to freeze bank accounts
When a bank freezes your account, many transactions can't go through, including withdrawals and debit transactions. Sometimes you can put money into a frozen account but can't get it out.
The bank can't freeze an account without reason, but there are certain times when the bank has authority to freeze an account whether you want them to or not. Knowing when a bank can freeze an account may help you avoid a lengthy argument with a bank representative.
You can ask most banks to freeze your account if you suspect that there has been illegal activity or if you suspect funds are being moved without your consent. The bank can freeze the account for a certain period of time--sometimes 24 hours, sometimes an hour and sometimes as long as you need--so that you can determine what’s going on, who has access to your account and whether you need to close your account.
The bank is suspicious of you
Banks can also freeze your account without your permission if they have reason to believe illegal activity has been taking place with the use of the account.
If you’ve used a fake check or they suspect you of money laundering, your account may be frozen so the bank can investigate. Mistakes can also lead to a frozen bank account. If your forget to put the check in the envelope before depositing the envelope at an ATM, the bank may freeze your account until you explain the accidental deposit, for example.
You owe a creditor
If you have missed a few months of payments to a creditor, such as a credit card company or your car loan, you may have your bank account frozen. If a creditor files a lawsuit against you for not paying your debt (usually three months or longer), the creditor can also request for the bank to have your account frozen.
The creditor may use your account as evidence that you have enough money to pay back some of the debt and yet you have still neglected to do so. It also may show some purchases you have made that weren't necessary when you could have been paying your debt. If your account was frozen for this reason, the money in the account may be seized to pay the debt.
The bank is suspicious of others
The bank also can freeze your account if there is suspicious activity that you may not be aware of, such as if someone has stolen your debit or credit card. Usually, the bank will not only freeze the account, but close it and create a new account.
However, they may freeze the account to investigate the fraudulent charges before proceeding to close the account completely. International or out-of-state charges; charges that are extremely expensive; or multiple big-purchase charges in a day could send the bank a red flag.
Deceased account holder
When the bank is notified that the owner of a bank account has died, the account may be frozen until the financial situation has been resolved. The bank will need to know who will be taking over the account or where the funds should be transferred.