Debit Card Dormancy
A dormant account is a bank account that has not been used for a prolonged period of time. People who have multiple bank accounts might have encountered this issue. Though you can reactivate it, it is important to know why and how this happens to your account. Learn more about account dormancy and its reasons in this article.
What is a Dormant Account?
A dormant bank account is an account that didn't have any activity for a prolonged period. The period is typically 12 to 24 months, depending on the bank policy. If you haven't made any transactions, including withdrawals, deposits, or transfers, or used the account for direct debits for the above-mentioned duration, your account may become dormant. When an account becomes classified as dormant, your account is not deactivated, but certain restrictions may be placed upon it.
Reasons for Account Dormancy
Other than the absence of financial activity, there are multiple reasons why your bank account may become dormant. Let's look at each of the reasons down below:
Multiple Bank Accounts: The major reason for dormancy is having multiple bank accounts. Most people may have more than one bank account, and not all accounts may be used the same way. This can lead to some of the less used accounts becoming dormant. Sudden changes in financial conditions, such as a sudden job loss, switching banks, relocation, etc., can lead to your account being dormant.
Long-Term Investments: Accounts opened for specific purposes, such as long-term investments, may have limited activity. Accounts specifically opened for fixed deposits are also similar. Such accounts are more susceptible to becoming dormant. Most of the time a reason that leads to account dormancy is neglect on the account holder's part. If the account is not used regularly, or as mentioned above, for specific purposes, it can easily lead to neglect and forgetfulness.
How to Know if an Account is Dormant?
If your account hasn't had any financial activity in a long time, before classifying it as dormant, the bank will contact you regarding that. The bank generally sends the account holder e-mails, letters, and notifications to let them know about the dormancy. This allows the account holder to take the necessary steps to reactivate it.
What Happens to a Dormant Account?
When an account becomes dormant, there are going to be some changes reflected in the account. The consequences of letting your account stay dormant are many. They are:
Fees: Depending on the bank, there might be some charges that you will have to pay if your account becomes dormant. The fee is a maintenance fee, which can be a hassle if your account doesn't have a lot of money in it, in the first place.
Restrictions on Access: Firstly, the account holder may face some restrictions, as once your account becomes dormant, you may not be able to use the account like before. There would be restrictions set on transactions, including withdrawals, using debit cards, issuing cheques, etc.
Interest Earnings: If your dormant account earns interest, it will still earn it while dormant. However, the interest earned now may be subject to fees because of its dormant status. And in some cases, the bank may only provide a lower interest rate for a dormant account.
What to Do to Prevent Account Dormancy?
There are many preventive measures that you can take to stop your account from being dormant. These are the simple things you can do to make sure your account doesn't go dormant:
- Make Regular Transactions: This is the most important thing to remember to prevent account dormancy. Especially if you are someone who has multiple accounts for various purposes, you must make sure you make some kind of transaction on all accounts. You can send an amount to your account or withdraw a small amount every 6 months so that it shows some financial activity in your account.
- Enable Direct Debits: Another good way to keep your account active is to link your utility bills to your account. This way you will be making payments with the account, thus eliminating the scenario of dormancy.
- Check your account: Inspecting your accounts regularly is an important thing to do, especially if you have multiple accounts. It may seem hard to keep track of activities in all accounts, but it is a must to ensure your accounts stay active.
- Accounts Consolidation: If you have multiple bank accounts, you can consider consolidating them. This makes it easier for the account holder to track finances better.
- Contact the bank: You can also let your bank know that you will not be using your account beforehand. The bank can help you with the situation and provide you with solutions.
How to Reactivate Your Dormant Account?
To reactivate your dormant account, you can contact your bank directly. You can submit a written request to reactivate your account or fill out the form produced by the bank. It is important to bring any of your identification proof. Once that is done, you will be required to make a transaction to complete the reactivation process.
FAQs on Debit Card Dormancy
- What is a dormant account?
A dormant account refers to a bank account that hasn't been active for a particular duration of time. Typically, the duration is between 12 and 24 months, depending on the bank.
- What leads to account dormancy?
Major reasons leading to account dormancy are having multiple accounts and forgetting credentials.
- How do I know if my account is dormant?
If your account is dormant, you will be contacted by your bank and informed about its status.
- How to prevent my account from being dormant?
You can easily prevent your account from being dormant by making small transactions with your account occasionally.
- What is the difference between an inactive account and a dormant account?
The major difference between an inactive account and a dormant account is that an inactive account has not been used for a short period of time. A dormant account, on the other hand, is inactive for a longer period.
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