Everybody has a drawer in their house where they store items they don’t often use. It could be a collection of odd gifts, worn-out electronics, or literature. Comparably, many of you would have a comparable drawer in your personal finance, which is your unused bank account.
A common financial management tendency among many would be to overlook accounts after opening a 0 balance account. Though you may open one with the best of intentions to save money, life gets busy, and the account is left unopened for months without any fund transfers.
Like the things hidden in that drawer, your bank savings account is dormant. This is strictly forbidden in the banking sector. So, knowing the differences between inactive or dormant bank accounts helps you manage the account:
What is an Inactive Savings Account?
A savings account that has not been used by the customer for a full year is usually referred to as an inactive savings account. When an account becomes inactive, it indicates that there haven’t been any transactions, withdrawals, or deposits within the allotted period. Inactive accounts don’t produce any noteworthy activity or transactions; they are simply idle.
Banks often have procedures in place for dealing with accounts that are not active. If the account is inactive for a long time, they could charge you specific fees or put limits on it. These payments, which are meant to cover the administrative expenses related to keeping the account, can take many forms, such as inactive account fees or monthly maintenance fees.
What is a Dormant Savings Account?
FD accounts usually unused for a particular period. But a 0 balance account that has not been used by the user for a long period of time usually longer than the term allotted for an inactive account is said to be dormant. A 24-month period is a specific period of time that an account must be deemed dormant.
A 24-month period during which no transactions, including deposits, withdrawals, or other account activities, have been made is known as the dormant period for an account. Although it is still open, the account is not used or produces any noteworthy activity.
Key Differences
- Activity Threshold: The amount of time that distinguishes dormant and inactive bank accounts is the main distinction. An account moves from active to dormant state after a longer period of inactivity, whereas it becomes inactive after a shorter period of inactivity.
- Restricted Access: Dormant accounts usually have limitations imposed on them. However, inactive accounts may still be available for transactions by the account holder. Certain steps, like going in person to the bank and presenting identification, can be necessary to access dormant accounts in order to reactivate them.
- Fee: Depending on the bank’s policy, inactive accounts might charge less fees while they are inactive. Still, until the account holder closes or reactivates the account, dormant accounts could be charged further fees or maintenance costs by the bank.
Final thoughts
You may handle your money more effectively with mobile banking apps and remain clear of needless fees and restrictions by knowing the distinction between dormant and inactive bank accounts. You can maintain a hassle-free and seamless banking experience by keeping track of account activity and taking proactive measures when needed.
