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Karat supports a wide range of creator and business customers. In certain situations, we may restrict access to an account or close it in accordance with our Terms of Service, cardholder agreements, and banking partner requirements. We understand that closures or restrictions can be disruptive. While we may not always be able to share specific details due to legal, regulatory, or compliance obligations, this article outlines common reasons an account may be restricted or closed.

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Common reasons for account closure

Karat may close a Banking account, Karat Card, or both for reasons including, but not limited to: Eligibility or agreement violations
  • Violation of our Terms of Service or applicable account agreements
  • Operating in a restricted or unsupported industry
  • Operating from or relocating to an unsupported geography
  • Using the account for purposes inconsistent with the stated business activity
  • Facilitating payments on behalf of unaffiliated third parties
  • Misuse of card products in violation of card network rules
Compliance and regulatory obligations
  • Incomplete or insufficient responses to requests for verification
  • Inability to verify identity, business activity, or source of funds
  • Activity involving restricted, sanctioned, or high-risk individuals or entities
  • Suspected illegal, fraudulent, or illicit activity
  • Attempts to evade KYC, AML, or other regulatory requirements
Account standing issues
  • Persistent negative balances
  • Conflicting instructions or ownership disputes
  • Extended account inactivity
    • Accounts that remain inactive for an extended period (generally 18 to 24 consecutive months with no meaningful activity) may be deemed dormant and subject to closure in accordance with regulatory requirements.

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What to expect if your account is closed

If your account is closed:
  • Account access will be disabled
  • Cards will be permanently deactivated
  • Credit lines (if applicable) will be terminated
  • You will no longer be able to initiate new transactions
In some cases:
  • Previously scheduled or in-flight transactions may still settle
  • Funds may be returned, held, or disbursed according to regulatory requirements
  • You may receive separate communication regarding fund disbursement
If applicable, details about any remaining funds will be included in your closure notification. In most cases, closure decisions are final. If circumstances materially change, we may review new information at our discretion.

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Locked or restricted accounts

In some situations, an account may be temporarily restricted rather than permanently closed. This typically occurs while we:
  • Await required documentation or responses
  • Review account activity
  • Investigate compliance-related matters
  • Process legal requests such as levies or garnishments
While restricted:
  • You may be unable to send money or initiate new transactions
  • Card activity may be paused
  • Certain dashboard features may be limited
  • Incoming transactions may still process depending on the restriction type
If we’ve requested additional information, please respond by the deadline provided in your email. Failure to provide required information may result in account closure.

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Why we may not share specific details

Due to legal, compliance, and security requirements, we may not be able to disclose the exact reason for certain restrictions or closures. Karat operates in partnership with regulated financial institutions and must comply with applicable U.S. banking laws and card network requirements. Karat is a financial technology company, not a bank. Banking services provided by Grasshopper Bank, N.A., Member FDIC. The Karat Visa® Business Credit Card is issued by Cross River Bank, Member FDIC, and pursuant to a license from Visa️ USA.