A general web directory of quality websites

Understanding Dormant Bank Accounts: What Happens to Your Money?

Category: Business | Date: December 31, 2023

Bank accounts play a crucial role in managing personal finances, offering a secure space to save and access funds. However, there are instances where an account may become dormant, raising questions about the fate of the money saved within. In this article, we will explore what dormant bank accounts are, why they occur, and what can happen to the funds stored in such accounts.

Definition of Dormant Bank Account:

A dormant bank account is one that has had no customer-initiated activity for an extended period, typically ranging from 6 months to a year, depending on the bank’s policies and local regulations. Customer-initiated activity includes deposits, withdrawals, transfers, or any other transactions that involve the account holder’s participation.

Causes of Dormancy:

Several reasons may lead to an account becoming dormant:

  1. Inactivity: The primary cause is the lack of customer-initiated transactions. If an account holder does not use the account for an extended period, the bank may label it as dormant.
  2. Change of Address: If the account holder moves and fails to update their address with the bank, important communications may not reach them, leading to unintentional account inactivity.
  3. Death of the Account Holder: In the unfortunate event of an account holder’s passing, the account may remain inactive until the legal heirs or beneficiaries claim the funds.

What Happens to the Money in a Dormant Account?

  1. Interest Accumulation:
    • In most cases, banks continue to pay interest on the funds held in dormant accounts, ensuring that the account balance does not stagnate entirely.
  2. Escheatment:
    • To comply with regulatory requirements, banks may transfer funds from dormant accounts to the state government in a process known as escheatment. This is done to prevent unclaimed assets from remaining indefinitely with the bank.
  3. Reactivation:
    • Account holders can reactivate a dormant account by initiating any transaction, such as making a deposit or withdrawal. This action signals to the bank that the account is active and prevents it from being classified as dormant.
  4. Notification Process:
    • Before transferring funds to the state, banks usually make efforts to notify account holders through various channels, such as letters, emails, or phone calls. These notifications inform account holders about the dormant status and provide an opportunity to reactivate the account.
  5. Claiming Funds:
    • If funds are transferred to the state, account holders or their legal representatives can reclaim the money by following the appropriate procedures outlined by the state’s unclaimed property division.

Preventing Dormancy:

To avoid the complications associated with dormant accounts, account holders should:

  • Regularly monitor their accounts and conduct transactions to keep them active.
  • Update contact information with the bank in case of address or contact number changes.
  • Make arrangements for the smooth transfer of assets in case of death, such as assigning beneficiaries or having a valid will.


Dormant bank accounts are a common occurrence, often arising from inactivity or changes in an account holder’s circumstances. Understanding the reasons behind account dormancy and the subsequent processes involved in handling dormant funds is essential for individuals to safeguard their finances and prevent any unnecessary complications. Regularly engaging with your bank accounts and staying informed about their status can help ensure that your hard-earned money remains accessible and secure.