How to Close a Dormant Account?


Some people have several bank account, and managing all seems to be a hassle. At the same time, some end up not using their account after losing faith in the banking system. If, perhaps, you fall in any of the listed categories, the chances that your account is made dormant by your bank are high. And, of course, if your bank ends up rendering your bank dormant, you may (out of frustration) want to withdraw the funds in the account (if there is any) and shut it. But, before you do that, you need to ask yourself if closing a dormant account is possible. If it is, you need to figure out how to close such an account.

All you have to do to close a dormant account is to visit your bank and make your desire known. You’ll be requested to fill in some forms and provide details of another bank account to which you want to transfer the funds. Provided you are in good standing with your bank; the process should be easy.

When an account is active, banks make money off it. But when it’s inactive, banks waste resources maintaining the account. Thus, if you fail to perform any activity on your account for a long time, your bank will end up rendering it inactive. If maybe, you are fed up with the account, you can decide to close it. But how do you close inactive account? Read on to find out.

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How to Close a Dormant Account?

You have finally decided to close your dormant bank account. After all, you have two other accounts, so closing the account shouldn’t be a problem. But what you fail to realize is that closing inactive account isn’t as easy as it seems.

Below I have highlighted how to close such an account. However, to hone our knowledge, I decided to summarize the meaning of a dormant bank account.

What Is a Inactive Account?

Many of us may know what is an inactive bank account, probably because your bank recently classified your account as dormant or because you read about it somewhere. For those who don’t know what a dormant account is, here is a brief definition.

Inactive account is one that has had no financial activity for an extended period, except for the posting of interest. Financial institutions are required by laws to transfer funds from such accounts to the state’s treasury after the account has been inactive for a specific period. The timeframe varies per state.

Accounts that can become inactive are checking and savings accounts, brokerage accounts, 401(k) accounts, pension funds accounts, including other accounts for financial resources.

How Inactive Account Works?

To become inactive or dormant, the account owner must not have made any activity for a certain period. A transaction can include contacting a financial institution via phone or internet, logging into the account, or initiating a withdrawal or deposit.

After an account fails to record any activity for a certain period, state law deems it as inactive. Banks and other financial institutions are required by state law to make an effort to reach out to the owners of such accounts using the most recent contact information by mail. A statute of limitations usually doesn’t apply to inactive accounts. What this means is that the owner or beneficiary can claim the funds at any given time.

If the owner’s attempt to claim funds in such account is unsuccessful, resources in the account become an unclaimed property and must be sent to the state’s treasury dept.

In California, for instance, checking, savings, including brokerage accounts, must experience zero activity for a minimum of three years before it is considered dormant. Also, in Delaware, there is a five-year dormancy period for similar types of accounts.

Why Do Accounts Go Dormant?

If you wake up one day and find out that your bank has rendered your account inactive, I bet you will be confused. And of course, you’ll have questions like, “why did my bank render my account dormant?”

Accounts become inactive simply because an account owner hasn’t made any activity on the account. This activity may include deposits, withdrawals, or transfers. Such could happen if someone lost their job or died suddenly, for example.

Accounts are then considered dormant for lacking activity. As soon as an account has been inactive for some time, a bank or any financial institution is required by law to escheat the fund to the state.

Of course, the state doesn’t leave the money like that. It uses it to fund projects like roads, schools, prisons, etc. The funds are indicated as debt on the state’s balance sheet to be repaid when the owner comes to claim what’s rightfully theirs.

How to Keep Your Account From Going Dormant?

Don’t want to have your account flagged as dormant? Then ensure you show your financial institution that you haven’t forgotten about it. Some of the best ways to do this are to:

  • Initiate a deposit, withdrawal, or transfer from the account; even it is as little as $5
  • Update your contact info
  • Log in to the account’s online portal
  • Reach out to your bank by phone, email, live chat, or visit a branch of the financial institution

Closing a Dormant Bank Account:

While closing such account is possible, the process varies by bank. In addition, you should understand that closing inactive account may be impossible if you have certain abandoned obligations like unpaid charges, fees, debt, etc.

To close a such account, you can reactivate it by performing a simple transaction, then visit your bank and close it (using the normal process). Or you can visit your bank while the account is still inactive and request to close the account. Your bank will tell you what to do afterward.

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How Do I Stop Being Dormant?

You failed to use your bank account for some months, and your bank ends up flagging it as dormant. Of course, you are shocked because you felt it was flagged too soon. Because the account is of great importance, you begin to ask questions about reactivating the account. How do you stop an account from being dormant?

The best way to stop your account from being dormant is by performing a transaction on it. This transaction can be a deposit, withdrawal, online transfer, updating your account information, etc.

To keep your account active, ensure you perform an activity on it. Consider transferring money between your accounts to keep them active.

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