What Is a Dormant Bank Account?

Using multiple bank accounts can be a good way to separate funds for different financial goals. However, if you forget about one of those accounts it could end up falling dormant. A dormant bank account is an account that registers no financial activity for an extended period of time. The amount of time that it takes for a bank account to be considered dormant can depend on the bank.

For help with your own banking needs, consider working with a financial advisor.

Dormant Bank Account Definition

A dormant bank account is a bank account that has no financial activity occurring for an extended time period. Generally, a bank account may be ruled dormant if there are no new:

• Deposits
• Credit transactions
• Debit transactions
• ACH transfers in or out of the account
• ATM withdrawals
• Debit card purchases
• Automated transactions, such as preauthorized bill payments

In other words, leaving a bank account dormant means that it’s sitting and doing nothing. A dormant savings account may continue to earn interest on the existing balance, but there are no new deposits being made.

What kind of bank accounts can become dormant? Generally, any deposit account could fall into dormancy. That includes checking accounts, savings accounts, money market accounts and certificate of deposit (CD) accounts. Safe deposit boxes aren’t necessarily excluded either, as your bank may consider your account dormant if your rental fees go unpaid for an extended period.

Why Do Bank Accounts Become Dormant?

There are lots of reasons why a bank account may become dormant. Here are a few scenarios that can result in a dormant account:

• Death of the account owner. A dormant bank account situation can happen when the owner dies and there is no beneficiary to claim it, or the executor overlooks it when completing their inventory of the deceased person’s estate assets.
• Changing banks. You may leave a dormant account behind when changing banks if you’re not taking steps to ensure the old account is properly closed. No new transactions may go through to the account but it’s still technically open.
• Forgetfulness. Sometimes, a dormant bank account is simply the result of someone forgetting that they have the account. For instance, you might open a new savings account and make an initial deposit, then let it slip your mind.

Dormant bank accounts aren’t necessarily a bad thing. However, letting an account go dormant could lead to fees or worse, the loss of 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 after six months with no activity of any kind at Bank A, while Bank B might not mark an account as dormant until 12 months or more have passed with no new transactions.

In terms of how long a bank account can sit dormant before the bank does anything about it, that can vary by the financial institution as well. After enough time has passed the account can be deemed unclaimed property.

State law can dictate when a bank account is considered to be dormant and what happens to the money in it. A typical time frame is three to five years, though again, the rules can depend on where you live.

What Happens When a Bank Account Goes Dormant?

Bank accounts don’t just become dormant overnight. There are a series of things that need to happen first before the bank assigns accounts a dormant label.

Typically, these are the steps:

1. You don’t make any new deposits, withdrawals or other transactions to or from the account for a set time period, which can vary depending on the bank.
2. The bank deems your account to be inactive. At this point, the bank may begin charging a monthly or yearly inactivity fee.
3. After additional time passes with no new activity, the bank can transition 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 funds in the account to the state.  The money then becomes unclaimed property. All of this is allowed under state escheatment rules.

How to Retrieve Funds From a Dormant Bank Account

If money from an old bank account ends up in the state’s hands, you have the right to try and get it back. Your state may have a specific process for doing so, 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 through national unclaimed property databases like MissingMoney.com or Unclaimed.org.

Once the state reviews your claim and approves it, you should get a check in the mail for the account balance, less any other fees that might apply. You could then put that 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 a forgotten cash windfall to further your money goals.

How to Avoid a Dormant Bank Account

The simplest way to avoid having a bank account go dormant is to make sure it’s registering regular activity. You could do that by:

• Scheduling a small recurring deposit to it each month from a linked bank account.
• Making a once-monthly or once-quarterly withdrawal.
• Using the account for a specific purpose, like paying a particular bill each month.
• Logging in to online or mobile banking to download your statements or update your contact information.

If you don’t think you’re going to use a bank account again, you may be better off closing it altogether. That way, you could avoid any inactivity fees the bank might charge if you’re not using it. Remember to verify with the bank in writing that the account is closed.

The Bottom Line

Letting a bank account go dormant may not be something you do intentionally, but it’s important to know how to manage accounts that have fallen by the wayside. Waiting too long to reactivate a dormant account or close it down entirely could mean having to do a little more work to track that money down with the state later.

Banking Tips

• Consider talking to your financial advisor about the best types of accounts to have to manage your money. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• If you’d like to be able to combine banking with investing, you might consider opening a cash management account in place of a regular checking account. Cash management accounts combine features of checking accounts and savings accounts, and it’s easy to open one at the same brokerage that holds your investment account or IRA. You can use your account to pay bills while earning interest on the money that you eventually plan to invest, or sweep in funds when selling investments in your brokerage account.