If there has been no deposits, withdrawals, transfers or point-of-sale transactions on the account, it will be considered 'Inactive' after six months. Accounts that have been inactive for a year or more are further classified as dormant.
Inactive Accounts
Generally, an account is considered abandoned or unclaimed when there is no customer-initiated activity or contact for a period of three to five years. The specific period is based on the escheatment laws of each state.
If you have a bank account that is dormant, escheatment will likely occur. Escheatment is the process by which unclaimed assets are automatically transferred by the bank to the state. When this transfer happens, it means you can no longer reclaim your funds from your financial institution.
If the account remains inactive, it may be classified as abandoned, and your funds may be turned over to the state. This practice may also be referred to as escheatment.
Consequences of a Dormant Account
Having an account go dormant can impact your ability to access and use the funds, which means: No withdrawals at ATM or branch. No address changes. No online banking transactions.
The only time a bank can withdraw money without telling you beforehand is if you've defaulted on a loan (such as a personal loan or auto loan), while also holding money in a bank account at the same institution.
Bank accounts become inoperative (or dormant), if they remain unused over a period of time. As per RBI guidelines, a savings/current account will be inoperative if there are no transactions in the account for over a period of two years.
When an account becomes dormant, it remains open but inactive, and the account holder cannot use certain features like online banking or ATM withdrawals. Banks may have policies to handle dormant accounts, such as charging fees, restricting access, or transferring funds to a separate account.
However, long periods of inactivity often cause accounts to be marked as dormant. The amount of time varies depending on the bank and the product. In general, current accounts are deemed 'lost' after about 12 months of no use, while savings accounts can be left for three to five years before the bank takes action.
An inactive account cannot be used to avail bank services like internet banking, request debit cards/cheque books, etc. Furthermore, you will be unable to alter your contact number, address, or email address if your account becomes dormant.
If a bank account is merely closed, you should contact the bank to recover the money. That being said a “dormant” bank account is one that has been turned over to the state. In that case, you need to contact the office of abandoned property for your state and reclaim it.
To ensure that families dealing with the death of a family member have adequate time to review and restructure their accounts if necessary, the FDIC will insure the deceased owner's accounts as if he or she were still alive for six months after his or her death.
Financial institutions are required to transfer the money held in dormant accounts to the state's treasury after the accounts have been dormant for a certain period of time. The amount of time varies by state.
The Savings Account becomes Inactive or Dormant
For instance, if you haven't carried out any transaction through your Savings Account for more than a year, then it is classified as "Inactive." Similarly, if you do not transact using your Savings Account for more than 24 months, it is classified as a Dormant Account.
A bank may decide to close your savings or checking account under any of the following circumstances: Your account has been inactive for a long time. According to the Office of the Comptroller, financial institutions might consider a bank account abandoned if it hasn't been used for three to five years.
Once submitted, the bank will inform you via SMS and email that your account is active again based on the KYC documents provided. There are no fees for reactivating dormant accounts, and banks cannot impose penalties for not maintaining minimum balances in such accounts.
Aadhaar Card, • Driving License • Passport • Voter's Identity Card issued by the Election Commission of India • Job Card issued by NREGA signed by a State Government official. letter issued by the National Population Register containing details of name and address.
A financial institution's core system will flag an account when it becomes dormant. Then, the bank or credit union will usually place the dormant account into a restricted status. This allows only certain employees to access the account, thereby reducing the risk of embezzlement.
Not all banks charge dormancy fees. For those that do, the fee can range anywhere from $5 to $20, and the amount of time that must pass before the fee is charged is typically between a few months and a year. How to avoid this fee: Don't open more accounts than you're able to keep track of.
Most of the time, a statute of limitations does not apply to dormant accounts. This means that the owner or beneficiary can claim the money at any time.
Only dormant credit accounts will affect your credit score as that involves you borrowing money. A dormant savings account won't impact you credit rating.
What Accounts Can the IRS Not Touch? Any bank accounts that are under the taxpayer's name can be levied by the IRS. This includes institutional accounts, corporate and business accounts, and individual accounts. Accounts that are not under the taxpayer's name cannot be used by the IRS in a levy.
You need to update your information with Social Security. A direct deposit to a closed account will bounce back. The routing number simply identifies which bank is to receive the deposit.
Transactions involving cash withdrawals or deposits of $10,000 or more are automatically flagged to FinCEN. Even if you are withdrawing this money for legitimate reasons — say, to buy a car or finance a home project—the bank must follow reporting rules.