It could be a traumatic shock to discover that your account for checking is frozen. If a bank locks your account, it indicates there is an issue with the account or there is a judgment against you to collect an unpaid loan. A freeze on your account means that the bank blocks your ability to make certain transactions. You can still have access to your accounts; however, there are limitations on what you can accomplish.
You'll still be able to check your account and receive your paycheck and deposits. However, the freeze prevents the transfer or withdrawal from being processed. Therefore, whatever you deposit to the checking account in this period remains there. This includes any preauthorized payment you've set to transfer funds to your account. Also, if you're making an outstanding mortgage or rent payment or a car loan repayment or a monthly bill to your membership at the gym, you have a high chance that they won't get through.
Suspected Fraud
The credibility of a bank's name is heavily based on its ability to keep your money secure, which is why the security of your account is usually taken seriously. Banks know how you use your cash, and any unusually high purchase or cash withdrawal could be a sign of fraud and prompt an account freezing. Banks also know the locations where you usually use your funds. If you make a transaction in a completely different city or, more specifically, in a foreign country could be a red flag and trigger a freeze on your account. It's recommended to inform your bank of your travel plans globally and nationally to avoid any accounts being frozen during your trip. If your bank detects suspicious activity that you're sure you were not responsible for, it could be because of identity theft.
Unpaid Debts
The failure to pay a single bill typically doesn't disrupt the access to your account's bank accounts; however, an overdue balance that's been accruing for a long time. Collection agencies who purchase unpaid debts may be able to obtain judgments from courts for the debts, which gives them the ability to block (or "attach") the banks of debtors until they pay the amount they owe. Most creditors are not able to be able to freeze your account in the event of a judgment against you. However, it is not the case for all. Government agencies that collect state and federal taxes and child support and student loans do not have to obtain a court ruling to join your account.
Illegal Activity
A bank account used for criminal activities or is linked to someone who may be involved could result in the account being blocked. Banks also cooperate with the law enforcement authorities. They can freeze accounts of people who have been convicted of a crime or are being investigated. Certain specific actions that can cause a freeze on an account are:
· Writing Bad Checks
A single check that bounces isn't a reason to be concerned; however, writing multiple checks with an account that doesn't have the funds needed to pay for them is considered illegal. If a bank notices excessively bad checks, they might be tempted to close the account and inform the police.
· Money Laundering
This involves making money through illegal activities and disguising it as legal by utilizing various financial transactions. Banks and financial institutions must comply with federal laws against money laundering and report any suspected activities directly to authorities.
· Terrorist Financing
Organizing or arranging money for terrorist groups is a crime that could result in the freezing of accounts. Banks must comply with federal laws in the fight against terrorism by freezing and reporting accounts that show suspicious activity associated with terrorists.
Can You Use Frozen Account?
There is still the possibility of receiving incoming transactions into a frozen account; however, withdrawals and outgoing transfer transactions are not allowed. Also, anything that is put into the account during this period is kept in it until the account freeze is lifted. If you've got preauthorized payments scheduled to be made through your bank account, those payments won't be processed through the institution until the account is free of freeze. You should make additional arrangements for payment to ensure that your company's operations and image are affected in the least amount possible by the freeze on your account implemented by the bank.
