Using multiple bank accounts can be a good way to separate funds for different financial goals. However, if you forget one of these accounts, it may end up being idle. A dormant bank account is one that does not record any financial activity for a long period of time. The amount of time it takes for a bank account to be considered dormant can depend on the bank.
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Definition of dormant bank account
A dormant bank account is a bank account in which there is no financial activity occurring for an extended period of time. In general, a bank account may be judged to be dormant if there is no new:
ACH transfers into or out of the account
Debit card purchases
Automated transactions, such as paying previously authorized bills
In other words, leaving the bank account dormant means that it is doing nothing. sleeping saving account You may continue to earn interest on the existing balance, but no new deposits are made.
What type of bank accounts can become dormant? In general, any deposit account can fall into dormancy. This includes checking accounts, savings accounts, money market accounts, and certificates of deposit (CD) accounts. Safety deposit boxes are not necessarily excluded either, as your bank may consider your account dormant if rental fees have not been paid for a long time.
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Why do bank accounts become dormant?
There are a lot of reasons for a bank account to be idle. Here are some scenarios that can lead to a dormant account:
The death of the account holder. A dormant bank account situation can happen When the owner dies There is no person entitled to claim it, or the executor neglects it when completing his inventory of the assets of the deceased’s estate.
change banks. You can leave a dormant account when you change banks if you don’t take the necessary steps to ensure the old account is properly closed. No new transactions may be made to the account but it is still technically open.
Forgetting. Sometimes, a dormant bank account is the result of someone forgetting they have one. For example, you can open a new savings account, make an initial deposit, and then let it go.
Dormant bank accounts are not necessarily a bad thing. However, leaving the account dormant may result in fees being charged or worse, losing the funds in the account.
How long does it take for a bank account to become dormant?
Banks can define dormant accounts differently. For example, your bank account may be considered dormant after six months without activity of any kind at Bank A, while Bank B may not mark the account as dormant until 12 months or more have passed without any new transactions.
As to how long a bank account can remain dormant before the bank does anything about it, that may vary by financial institution as well. After enough time has passed, the account can be considered unclaimed property.
State law can determine when a bank account is considered dormant and what happens to the money in it. The typical time frame is three to five years, but again, the rules can depend on where you live.
What happens when a bank account becomes dormant?
Bank accounts do not become idle overnight. There are a series of things that need to happen first before a bank will designate dormant accounts.
Usually, these are the steps:
You cannot make any new deposits, withdrawals or other transactions to and from the account for a specified period of time, which can vary by bank.
The bank considers that your account is inactive. At this point, the bank may start charging you a monthly or annual fee for inactivity.
After additional time passes without any new activity, the bank can convert the account from inactive to dormant.
At this point, the bank can close the account. If there is no current contact information on file for you, the bank can send any money in the account to the state. Then the money becomes unclaimed property. All this is allowed under State transfer rules.
How to recover money from a dormant bank account
If money from an old bank account ends up in the hands of the state, you have the right to try to get it back. Your state may have a set process for doing this, but it may be as simple as filling out a form and paying any applicable fees.
Not sure where your bank account went? Your state may offer an online unclaimed property database that you can use to search for old bank accounts. You can also search national unclaimed property databases such as MissingMoney.com or Unclaimed.org.
Once the state has reviewed and approved your claim, you should receive a check in the mail for the account balance, less any other fees that may apply. You can then put this money into an existing bank account or use it to open a new account.
If it’s a large amount of money, you might consider investing it instead. You can talk to your financial advisor about the best ways to use forgotten monetary gains to further your financial goals.
How to avoid a dormant bank account
The simplest way to avoid having a bank account dormant is to make sure it records regular activity. You can do this by:
Schedule a small, recurring amount deposit for him each month from a linked bank account.
Make a withdrawal once per month or quarterly.
Using the account for a specific purpose, such as paying a specific bill each month.
Log in to Online or Mobile Banking to download your details or update your contact information.
If you don’t think you’ll ever use a bank account again, it might be best to close it completely. This way, you can avoid any inactivity fees that your bank may charge if you are not using it. Remember to confirm with the bank in writing that the account is closed.
Leaving a bank account dormant may not be something you do on purpose, but it is important to know how to manage accounts that have fallen by the wayside. Waiting too long to reactivate the dormant account or close it completely could mean having to do more work to trace that money back with the state later.
Consider talking with your financial advisor about the best types of accounts you can use to manage your money. Finding a qualified financial advisor is not difficult. Free SmartAsset tool It matches you with up to three financial advisors serving your area, and you can interview your advisors at no cost to determine the right one for you. If you are ready to find a counselor who can help you achieve your financial goals, let’s start.
If you would like to be able to combine banking and investing, you might consider opening an account Cash management account instead of the regular current account. Cash management accounts combine the features of checking accounts and savings accounts, and it’s easy to open one at the same brokerage firm that holds your investment account, or IRA. You can use your account to pay bills while ultimately earning interest on the money you plan to invest, or sweep away the money when you sell the investments in your brokerage account.
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