What Is a Dormant Account? [Banking Basics]

In this article, weโ€™re answering โ€œwhat is a dormant account?โ€

In its simplest form, a dormant account is an account that has not had any transaction activity for a specified amount of time.

However, there are a number of important nuances that go into understanding such accounts and what can happen if you donโ€™t use an account for too long. Weโ€™ll explore all of this and more below.

This article is part of our free series on how to open a bank account, which covers bank accounts for all possible scenarios, including when an account has been frozen or closed.

Feel free to use the table of contents to jump ahead to the sections most relevant to you.

Table of Contents

  1. What Is a Dormant Account?
  2. What Happens if the Account Is Dormant?
  3. Frequently Asked Questions
  4. Ready to Explore Your Options?

What Is a Dormant Account?

A dormant account is any bank account that has not sent or received a transaction in a fixed period of time. Importantly, each bank has different timelines for determining when a bank becomes dormant. However, most banks require a transaction every six to twelve months. Though the best practice is to send or receive a transaction at least quarterly.

With this in mind, if you have bank accounts that you do not use on a regular basis, you should review your bank account activity requirements. Otherwise, you could end up with one of your accounts being marked as dormant, which can be an issue if you want to access your funds in the future.

Importantly, bank charges including monthly or annual fees and interest payments do not count as account transactions. Instead, you will need transactions between your account and another account.

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What Happens if the Account Is Dormant?

When an account is dormant, a few important things happen. First, transaction activity is restricted, effectively freezing your bank account. Second, in order to reinstate the account, most banks require you to complete the account opening process again. Third, if it remains dormant for a certain period of time, the money may be confiscated by the government.

Can You Transfer Funds From Your Bank to Your Dormant Bank Account?

No, you cannot transfer funds from your other bank account to a dormant bank account. Dormant accounts are effectively frozen and all inbound and outbound transactions are blocked.

Can a Dormant Bank Account Earn Interest on the Deposit In the Account?

No, dormant bank accounts do not earn interest on the deposit. In fact, they typically incur fees from the bank for being dormant. Not surprisingly, the fees charged vary from bank to bank.

How Long Can Bank Accounts Be Dormant?

How long bank accounts can be dormant ultimately depends on the country where the account is domiciled. This is because, in addition to banks marking accounts as dormant, governments have decided they should be put to use to benefit their electorate.

In other words, after a dormant account has sat idle for a fixed number of years, the money is confiscated by the government. When this happens, the account is referred to as an abandoned account. In certain jurisdictions, accounts can be confiscated in as little as one year, while in other places they can sit for up to fifteen years.

With this in mind, it is very important to know how long accounts can sit dormant before being confiscated in the jurisdiction where you plan to open before doing so.

Frequently Asked Questions

Below are three of the most common questions that we receive from people looking into what a dormant account is. If you have further questions you would like answered, donโ€™t hesitate to get in touch with us directly.

How to Use a Dormant Account?

You cannot use a dormant account. Instead, you will need to contact the bank and request that your account be reactivated. Certain banks will require you to complete the account opening process again while other banks may only request proof of identity and account ownership.

How to Close a Dormant Account?

To close a dormant account you will need to contact your bank directly and initiate the account closure process. This requires you to submit an account closure application and provide the bank with the corresponding account where you want any remaining funds deposited.

How to Reactivate a Dormant Account?

To reactivate a dormant account you will need to contact your bank and ask to start the process. Depending on the bank, you may need to show up in person. Likewise, certain banks require customers to complete the entire account opening process again. Alternatively, certain banks may require you to provide proof of identification and account ownership.

Ready to Explore Your Options?

If you would like assistance navigating your banking options at home or abroad, we can help.

You can access GlobalBanks IQ, our international banking intelligence platform, in just a few clicks. Unlock our bank database, individual bank profiles, account opening strategies and reports, banker scripts, and more.

But, if you want a 100% personalized account opening service that taps into our teamโ€™s expertise and provides direct banker introductions, you can get started with GlobalBanks Insider.

Of course, if you have any questions, please contact us directly.

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