What Is Debanking? 5 Reasons You’ve Been Debanked and Next Steps

On any given day, most of us can withdraw cash from an ATM, deposit our paychecks, and use a debit card at the grocery store. But what happens if you wake up one day and you can’t access your bank account at all? What if you can’t log into your account to pay your bills or check your balance?

That’s the reality for people and companies who have been debanked. 

Debanking is when a bank decides to close an account, usually without advance notice. It’s recently gotten mainstream attention in the news. In August 2025, the White House issued an executive order to prevent banks from closing accounts illegally. Below, we’ll explain the current controversy about debanking and share what to do if this happens to you.

Table of Contents

1. Why is debanking controversial?
2. 2 types
   1. Operational
   2. Governmental
3. 5 reasons you might have been debanked
   1. 1. Reputational risk
   2. 2. Inactivity
   3. 3. Regulatory pressure
   4. 4. Profitability
   5. 5. Red flags
4. What happens when you’re debanked?
   1. Individual customers
   2. Business customers
5. What to do if you’ve been debanked

Why is debanking controversial?

There are two sides to the debanking controversy. On one side, banks have the authority to close accounts for various reasons, including when customers are inactive or complete transactions the bank deems to be red flags. Banks will also close business accounts involved in industries the bank considers risky. 

As the Reddit post below indicates, banks don’t always share the reason they’ve closed an account:

Chase bank account cancelled by Chase, debanked, my experience
byu/mikestrank inChase

This can be confusing and upsetting when it happens. President Trump issued an executive order in August alleging that some financial institutions debanked individuals and businesses due to their political or religious beliefs, which is discrimination.

The controversy comes down to authority and access. Banks that are private institutions say they have the right to close accounts. The federal government says banks must have a valid reason that is not discriminatory, and the recent executive order gave banks a timeline to reinstate clients who were unlawfully debanked.

2 types of debanking

The Cato Institute, an independent public policy research organization, explains the two types of debanking: operational and governmental. 

Operational debanking

This type of debanking occurs when banks decide not to work with certain types of businesses, such as payday lenders, firearms dealers, cannabis companies, prisons, or businesses related to cryptocurrency. 

Debanking also happens to individual customers when banks decide to close accounts. While banks don’t always give a reason, it can be because of suspected fraud, overdrawn accounts, inactive accounts, or even human error.

Governmental debanking

Governmental debanking, on the other hand, is when the government steps in and asks banks to discontinue relationships with certain types of businesses. The FDIC maintains a historical record of “pause letters” sent to banks, many of which include specific requests asking banks to cease working with cryptocurrency-related companies.

5 reasons you might have been debanked

If you were debanked, here are a few reasons it might have happened. Even if you weren’t engaging in unlawful activity, certain transactions or types of businesses can trigger account reviews.

1. Reputational risk

Banks are supposed to be trusted institutions, so any individual or business that might harm a bank’s reputation may be debanked. This is a controversial reason to debank customers because lawmakers say it leads to discrimination. The Senate Banking Committee has recently asked regulators to stop using reputation in their assessments of financial institutions.

2. Inactivity

If you don’t use your bank account for an extended period, banks may close it due to inactivity. So if you want to keep doing business with a particular bank, it’s wise to make purchases with that account and deposit money in it regularly. 

3. Regulatory pressure

Even if you are not doing anything illegal, banks may get pressure from federal regulators to close accounts that make purchases or conduct business in specific industries, like cryptocurrency or adult entertainment. 

If you run a business, be sure to follow all the financial institutions’ account rules. Avoid actions that may cause your account to get noticed.

4. Profitability

If you don’t use your account or have a low balance, banks might choose to close it because it’s not profitable. There might also be certain types of accounts that banks close because they cost more to maintain than what they earn.

5. Red flags

If you’ve had a couple of issues with your account, like overdrafting or payments bouncing, it could cause a bank to close your account without notice. Banks constantly monitor customer accounts for suspicious activity, which could be as simple as receiving a large wire transfer.

What happens when you’re debanked?

Finding out you’ve been debanked is a terrible feeling. When it happens, the most significant consequence is that you lose access to your bank accounts. Some customers lose access to their accounts immediately, while others have time to switch their assets to a different bank. 

As one Redditor shared, their account and several family members’ accounts were closed, but the bank (Wells Fargo) gave them two weeks to move their assets:

Anyone else been "Debanked" by Wells Fargo?
byu/Ok_Recognition_6727 inWellsFargoBank

Consequences for individual customers

For individuals, getting debanked is stressful, making it challenging to open a new bank account. Other banks that use ChexSystems to evaluate whether a customer is a risk will see that your account has been closed and may not allow you to open a new one.

Consequences for business customers

For businesses, getting debanked can disrupt cash flow, make it challenging to pay vendors, and cause payroll delays. This can damage customer relationships as well as a business’s reputation. 

Ultimately, whether you’re an individual or a business, getting debanked is a serious, stressful issue that will take time to resolve.

What to do if you’ve been debanked

Here are the next steps to take if you’ve been debanked.

1. Call or visit your bank: Ask a bank manager whether your account was closed intentionally. Sometimes, banks close accounts due to human error, lack of identity verification, or suspected fraud. If there was an error, ask what supporting documents you can provide to reactivate your account.
2. Ask for an explanation: If the bank confirms it closed your account on purpose, request an explanation in writing. Ask the bank whether it used a system like ChexSystems or Early Warning Services (EWS) to make the decision.
3. Apply for a new bank account: Get a new bank account at an institution that doesn’t rely on ChexSystems, or one that is member-owned, like a credit union. Another option is to use Chime, a fintech company that offers banking services with no monthly or overdraft fees, even for its second-chance checking accounts.
4. Redirect paychecks and bills: Once you set up your new account, make sure to update your direct deposit information at work so you can receive your paychecks, and then update your bank account for any bills that auto-withdraw.
5. File a complaint: If you believe your bank closed your account without a justifiable cause, file a complaint with the Consumer Financial Protection Bureau. Debanking is newsworthy, and filing a complaint can help regulators identify banks that may not be following the law.