Managing your savings account is a crucial aspect of your financial responsibility. It’s essential to comprehend the distinctions between an inactive savings account and a dormant one to ensure you make informed financial decisions. Let’s delve into these differences to help you navigate your savings effectively.
What is an inactive savings account?
Imagine your savings account as a quiet haven for your money. If you haven’t touched it for 12 months, it enters an “inactive” state. This means no deposits, withdrawals, or online transactions have occurred for a year. While the account remains open, it’s idle, generating no significant activity.
What happens when your account is inactive?
Most banks have policies for inactive accounts. These may include:
- Fees: Some banks charge maintenance fees for inactive accounts, essentially covering the administrative costs of keeping them open.
- Limited access: You might encounter restrictions on online banking or ATM transactions.
- Notifications: Banks may send reminders to reactivate your account.
What is a dormant savings account?
If your savings account remains untouched for 24 months, it becomes “dormant.” This means no activity for two years, making it inactive and generating no significant movement.
What happens when your account is dormant?
Things get stricter for dormant accounts. Here’s what to expect:
- Interest freeze: Some banks stop accruing interest on dormant accounts.
- Higher fees: Dormant account fees are often higher than maintenance fees for inactive accounts.
- Restricted access: You might lose access to online banking, ATM withdrawals, and even phone banking.
- Dormant account transfer: In extreme cases, the bank may transfer the remaining funds to a separate dormant account.
Key differences between an inactive and dormant account
While “inactive” and “dormant” are often used interchangeably, it’s important to note some distinctions in definitions and policies across different banks. Here’s a quick overview:
Timeframe: Inactive accounts become dormant after 12 months of inactivity, and dormant accounts extend the period to 24 months.
Account status: An inactive account is idle but remains open and active, whereas a dormant account is inactive with additional restrictions.
Transactions: Inactive accounts can still receive funds, while dormant accounts don’t allow transactions.
Interest and charges: Inactive accounts may accrue interest and incur charges, but dormant accounts may experience ceased interest, and dormant account fees may apply.
Reactivation: Inactive accounts can be reactivated by transaction, whereas dormant accounts require a specific reactivation process or request.
Access to funds: Inactive account funds can be withdrawn anytime, while dormant accounts have restricted access, requiring reactivation.
Communication: Banks may send reminders or notifications for inactive accounts, but communication is limited for dormant accounts.
Account type change: Inactive accounts remain the same type, while dormant accounts may undergo a type change, such as from savings to current.
Unclaimed funds: Inactive account funds are not considered unclaimed, but dormant account funds may be deemed unclaimed after a certain period.
Fees and charges: Inactive accounts may incur maintenance fees or dormant account fees, and additional fees may apply to dormant accounts with specific reactivation requirements or charges.
Specific restrictions: Inactive accounts have no specific restrictions beyond inactivity, while dormant accounts may have limited access, frozen funds, or special reactivation procedures.
Bank handling: Inactive accounts may have nominal priority for maintenance, while banks may take specific actions for dormant accounts.
By following these simple tips, you can ensure your online savings account remains active and healthy, allowing you to access your funds seamlessly and maximise their growth. Remember, a little activity goes a long way in keeping your financial well-being on the right track.
