What Is a Dormant Account?

Dormant accounts can occur at any financial institution including banks, credit unions, and investment firms. They can exist in the form of savings accounts, checking accounts, certificates of deposit (CDs), retirement funds, and other types of deposit or investment accounts.

Definition of a Dormant Account

A dormant account, also known as an inactive or abandoned account, refers to a bank or financial account that has had no activity for an extended period of time. This can include savings accounts, checking accounts, credit cards, and other types of financial accounts.

The exact length of time required for an account to be considered dormant varies depending on the institution and their policies. However, typically an account is deemed dormant if there has been no customer-initiated activity within 12-24 months.

It is important to note that dormancy does not mean the account is closed or inactive permanently. In most cases, these accounts still hold funds and are subject to fees and interest just like any other active account. The main difference is that there has been no recent activity from the owner.

There are several reasons why an individual may have a dormant account. It could be due to forgetfulness, a change in financial institutions, or simply neglecting to close the account after it was no longer needed. Additionally, some individuals may intentionally keep their accounts dormant as a way to store money without actively using it.

One common misconception about dormant accounts is that they are considered abandoned and the funds within them will become property of the bank or institution after a certain amount of time. However, this is not entirely true. While it is possible for unclaimed funds in a dormant account to be turned over to state authorities through a process called escheatment, there are strict regulations in place that require banks and institutions to make multiple attempts to contact the account holder before this can happen.

Overall, dormant accounts are a normal occurrence in the banking and financial world and do not necessarily indicate any illegal or fraudulent activity. It is important for individuals to keep track of their accounts and regularly review them to ensure they are not being charged unnecessary fees or missing out on potential interest.

How Does an Account Become Dormant?

The most common reason for an account becoming dormant is lack of activity. Banks typically consider an account as dormant if there have been no withdrawals or deposits made within a specified period.

Another factor that can contribute to an account becoming dormant is outdated contact information. If your address or phone number linked to your bank account changes and you fail to inform your bank about it, they may not be able to reach you regarding any important updates or notices. In such cases, banks may put a hold on the account until they can make contact with you again.

In some cases, accounts can also become dormant due to inactivity combined with low balance. Most banks have minimum balance requirements for their accounts; if your account falls below this amount and remains inactive for an extended period, the bank may classify it as dormant.

What Happens to Dormant Accounts?

Once an account is classified as dormant, banks have certain procedures they must follow. These procedures are designed to safeguard the customer’s funds and prevent fraud.

Firstly, the bank will attempt to contact the account holder using the most recent contact information they have on file. They may send a letter or call the phone number associated with the account. If there is no response from the account holder, the bank may try to locate them through public records or online databases.

If all attempts to reach the account holder fail, the bank will then take steps to protect the funds in the dormant account. This can include transferring any remaining balance to a specific type of account called an “escheat” or “unclaimed” account. These accounts hold unclaimed funds until they can be claimed by their rightful owner.

Most banks also charge a fee for maintaining a dormant account. This fee is usually deducted from any remaining balance in the account until it reaches zero.

Risks and Consequences of Having a Dormant Account

1. Account Closure: One of the biggest risks of having a dormant account is that it may be closed by the bank or financial institution where it is held. Most banks have policies in place that allow them to close accounts that have been inactive for a certain period of time, usually between 6 months to 1 year. This means that if you don’t use your account for transactions or keep track of its activity, there is a chance that you could lose all the money in it.

2. Fees and Charges: Dormant accounts are also subject to various fees and charges imposed by banks or financial institutions. These fees can include monthly maintenance fees, inactivity fees, and even penalty charges for not maintaining a minimum balance. If your account remains inactive for an extended period of time, these charges can add up and significantly reduce your balance.

3. Identity Theft: Another risk associated with dormant accounts is identity theft. If you do not regularly monitor your account activity or update your contact information with the bank, you may not be aware if someone gains access to your account without your knowledge. This can result in fraudulent transactions being made from your account which could lead to serious financial loss.

4. Negative Impact on Credit Score: Dormant accounts can also have a negative impact on your credit score. If you have a credit card or loan account that is dormant, it will not show any recent activity or payments on your credit report. This can make lenders view you as a risky borrower and could potentially lower your credit score.

5. Missed Opportunities: Keeping your money in a dormant account means missing out on potential opportunities to earn interest or invest it for higher returns. Inflation can also erode the value of your money if it is not actively managed.

6. Difficulty in Accessing Funds: If you need to access the funds in your dormant account, you may face difficulties in doing so. Banks may require additional steps to verify your identity and ownership of the account before releasing the funds, which can be time-consuming and inconvenient.

7. Unclaimed Property: After a certain amount of time, dormant accounts may be classified as unclaimed property by the government and handed over to state authorities. This can make it even more difficult to retrieve your funds and may require legal processes to do so.

Tips for Avoiding a Dormant Account

  • Keep track of your accounts
  • Set up automatic payments
  • Use online banking services
  • Update contact information
  • Use direct deposit
  • Make small transactions
  • Consolidate accounts
  • Set reminders
  • Close unused accounts
  • Keep up with changes in policies

Steps to Reactivate a Dormant Account

Step 1: Check Your Account Balance

Before you begin the process of reactivating your dormant account, it is essential to check its current balance. You can do this by either visiting your bank in person or checking online through their website or mobile app. It is crucial to know how much money you have in the account before proceeding with any further steps.

Step 2: Contact Your Bank

The next step would be to contact your bank and inform them about your intention to reactivate your dormant account. You can do this by phone or in person at a branch location. Be prepared to provide personal identification documents such as government-issued ID and proof of address.

Step 3: Update Your Information

In some cases, your contact information may have changed since you last used the account, which could be why it became dormant. If this applies to you, make sure to update your information with the bank so they can reach out to you if needed.

Step 4: Provide Proof of Activity

Banks may require proof that you are still actively using the account to reactivate it. This could be in the form of a recent transaction or deposit. If you do not have any recent activity, you may need to make a small deposit or withdrawal to show that the account is still active.

Step 5: Pay Any Necessary Fees

Banks may charge fees for reactivating a dormant account. These fees can vary depending on the bank and the length of time the account has been dormant. Make sure to ask your bank about any potential fees and pay them if required.

Step 6: Verify Your Signature

In some cases, banks may require customers to verify their signature before reactivating a dormant account. This is done for security purposes and helps ensure that the person requesting to reactivate the account is the actual account holder.

Step 7: Keep Your Account Active

Once your account has been successfully reactivated, make sure to keep it active by using it regularly. This will prevent it from becoming dormant again in the future. It is also important to keep track of your account balance and stay aware of any potential fees or changes in policies that could affect your account.


It is crucial to regularly monitor all your accounts, including dormant accounts. As we have discussed earlier, a dormant account may seem harmless at first but can lead to various problems if left unattended for a long time. By monitoring your accounts regularly, you can avoid these potential issues and also enjoy the lots of  benefits.

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