Understanding inactive and dormant savings accounts
A lot of people end up with an inactive or dormant savings account. It might be due to financial changes, unexpected events, or a lack of attention. Life’s busy, there’s no two ways about it. Fortunately, these unused accounts can be easily reactivated!. All you need is ID proof, address verification, or filling out forms with a written request that states your intention to renew the account.
Knowing how to reactivate a savings account is important. This blog will help you understand the distinction between inactive and dormant accounts. It also provides useful tips on how to reactivate an inactive or dormant savings account. A dormant savings account is an inoperative account with 2 years of no activity. Follow these tips and ensure your savings account remains available for use and withdrawals.
Let’s begin by learning the differences between an inactive and dormant account:
Inactive account: Your savings account becomes inactive after 12 months of no activity. Until you reactivate it, you won't be able to do any transactions.
Dormant/inoperative account: It is an account in which you have not made any withdrawals or deposits for 24 months. Even if your account is still active, you cannot access it until you reactivate it.
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Differentiating between inactive and dormant accounts
It is important to know the differences as it impacts how to reactivate bank accounts.
Inactivity period: An account becomes inactive after not being used for 12 months, while it takes 24 months of no activity for an account to be deemed dormant.
Banking limitations: Inactive accounts may limit some services like online banking and debit card access. But dormant accounts impose more limitations, including ATMs, phone banking and Internet banking restrictions.
Reactivation process: To reactivate an inactive account, you can simply resume banking activities like making deposits, withdrawals or transfers. Some banks let you reactivate inactive accounts online. For dormant accounts, you must request reactivation from the bank and give identity proof.
Income tax reporting: You should report all active, inactive and dormant accounts when filing taxes.
Customer support assistance: Inactive accounts may have regular customer support assistance available, where you can contact the bank for any account-related assistance. In the case of dormant accounts, customer support may be limited until the account is reactivated.
Restrictions on a dormant account
When a savings account becomes dormant, certain limits and restrictions are put in place to protect the account's security.
- Limited use of ATMs, online banking and mobile banking apps: Once an account is marked dormant, the account holder may have restricted or limited access to these banking services.
- Restrictions on cheque transactions: Writing or cashing cheque from a dormant account may not be allowed or require special permission.
- Limits on requesting a new cheque book: Getting a new cheque book for a dormant account could be subject to certain rules or need extra verification.
- Restrictions on updating account information: Changing the account holder's address, signature, phone number or other details may be limited for a dormant account.
- Restrictions on joint accounts: Adding or removing account holders from a joint dormant account could be subject to specific rules.
- Limits on issuing or renewing cards: Getting or renewing ATM cards, debit cards or credit cards linked to a dormant account may have certain requirements.
These limitations are put in place to reduce the chance of unauthorised access while the account is dormant.
How to Reactivate your bank account
Step 1: To know how to activate a dormant account, understand its current status. Banks classify accounts as inactive or dormant based on how long they've been untouched.
Step 2: Once you know the account's status, you can reactivate it. Contact the bank to learn the process. They'll provide forms and guidance. Fill out an application requesting reactivation, including all joint account holders' signatures.
Step 3: Gather Know Your Customer (KYC) documents like proof of address, ID proofs, etc. These verify your identity for regulatory compliance. Perform a financial transaction like depositing/withdrawing cash or transferring funds. This shows you intend to use the account again. Most banks don't charge fees for reactivating dormant accounts. However, any past-due fees due to inactivity may need to be paid first.
Step 4: After reactivation, actively use the account to avoid it becoming dormant again. Make regular deposits, withdrawals or transfers.
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There are multiple benefits to reactivating your dormant savings account:
- First, you protect your money and avoid potential fees or penalties that could decrease your savings over time.
- Second, reactivate bank accounts restores access to useful banking services and features like online banking, debit cards and cheque books, allowing for convenient money management and updates.
- Third, once you know about how to activate a dormant account, you can use the account again to save money for your goals, earn interest and include it when filing taxes to properly support your financial planning.
Knowing the key differences and taking the appropriate steps helps you reactivate your account and avoid any potential loss of funds. Reactivating an account protects your money and restores convenient access to banking services like online banking, debit cards and cheque books. It enables you to save money, earn interest and correctly include the account details in your tax filings, supporting your financial goals and plans.
To reactivate your account, contact your bank, submit the necessary documents and do a financial transaction. Once reactivated, actively using the account afterwards helps ensure it remains active and accessible for future use.
If you’re looking to open a zero balance account online, Kotak811’s digital savings account is an easy and quick solution with many features and benefits. Save as you wish, with no minimum balance restrictions, make banking easier for yourself.
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.