What happens if you make a payment to a bank account that has been closed without your knowledge, or someone who owes you money tries to deposit it into an account that you have closed? What happens to your money? These were once common questions people asked about bank processes, but you don’t hear them much anymore, for a very good reason – it's almost impossible.

Back when banking was a matter of withdrawing or depositing cash and everything was recorded with handwritten entries and stamps in ledgers and bank books, it was possible to close an account at one bank branch and still have payments made in error at another branch. These would take time and investigation to sort out.

What happens when money is sent to a closed account?

Modern digital banking, in contrast, offers immediate updates across the system online. So, if you try to deposit money into a closed current or savings account, the transaction will most likely be declined or returned. If the account details don’t match an existing account, the financial institution will simply decline the transfer. If by some slim chance the transfer has already taken place and a valid account can’t be found matching the details on the transaction, the transfer will simply be reversed. Each bank has its own policy for how long these processes will take, but usually it’s no more than a couple of business days.

If you’re sending money directly to a bank account, ensure you have the correct account and other key information. Don’t rely on autosaved info – reconfirm using the information from the recipient’s invoice or online payment details.

If you’re sending money using a money transfer app or service, ensure that you have the right account name, email address, and phone number for your recipient. Some money transfer services allow you to track your transfer, giving you time to stop payment if necessary.

Refunds on deleted virtual cards

Virtual cards are an excellent way to make digital payments with an extra layer of security protecting your actual account details, but they need special attention when we discuss payments to closed accounts. One of the benefits of virtual cards is that each one is generated with a unique card number and PIN, linked to your bank account, and those details become invalid when you cancel the virtual card, or it reaches a set expiry date.

However, problems can arise if you need a refund on a payment that you made with a virtual card – for instance, if the card was linked to an account that has since been closed, or if the account is still open, but the virtual card has now expired. If you have used virtual cards for recurring transactions, you’ll need to update details of a new virtual card, linked to an active account, with the relevant merchants and apps before you can be refunded.

Informing relevant parties about closed accounts

Your bank is under an obligation to honour your payment instructions as the account holder, but it does not have the right to disclose any of your account information to a third party. Therefore, it’s your responsibility to let relevant parties know about any accounts that you close. Nedbank takes the privacy and confidentiality of your account information very seriously and adheres strictly to the South African Protection of Personal Information Act (POPIA).

POPIA protects your personal financial information and under its provisions, your bank cannot by law provide information about your accounts to third parties – even if they have deposited money into one of your accounts incorrectly, whether it was open or closed. However, your bank can reverse a transaction when an open account was wrongly credited, and it can also reverse deposits when the money came by way of fraud or theft.

Nedbank has a full range of account options that are easy to open and that cater for all your savings and investment needs. You can manage all your accounts securely and easily through the Money app. You can also use the Money app for a range of virtual cards tailored to your payment needs.