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You go to the bank to get a new credit card or to get a new loan. However, you find that your account is considered inactive. But you don't remember closing the account yourself. And so you wonder, “can a bank account be closed due to inactivity?”
Unfortunately, yes, a bank account can be closed due to inactivity. It is also known as “inactive” or “inactive status”. The inactive status of the bank account means that you have not been active in the last few months, though the specific amount of time you'd need to pass differs from each bank. You are considered inactive if you have not deposited or withdrawn any money from your bank account during this period.
Reasons Why Banks Close Inactive Accounts
There are many reasons why a bank account can be closed due to inactivity. These include:
They need to start an escheatment process
Once a bank account is deemed inactive throughout a certain amount of time, a bank can be forced to give the money to the government in a process known as escheatment. The time period before this escheatment process is required differs; it can be anywhere around three or so years.
The state can escheat assets that are in the bank accounts of dead people, especially if the deceased person does not have any heirs. If the state has made countless attempts to contact the owners or agents of the money that has been escheated, the money that has not been redeemed becomes the property of the state.
The cost of maintaining your account is too high
Some banks find that maintaining an inactive account is too expensive, especially if the account holder has not deposited or withdrawn any money from the account for a very long time. Maintaining a bank account comes with many costs, including the cost of security, accounting, keeping your data stored in their database, and mailing you regular statements.
Consequently, some banks may decide to close an account that has very little money in it because it may be more cost-effective to do so. You should remember that banks rely on your money to generate income, often by lending money to others. Inactive accounts can therefore cause the bank to have a hard time generating cash. Banks may close accounts for low account balances, insufficient regular transactions, or a lack of direct deposits.
What Happens if Your Inactive Bank Account Gets Closed
The bank may close your account immediately or it may wait until you've gone through the process of reactivating your account. Once the bank has closed your account, it will not be able to accept any deposits or withdrawals. However, there are ways to reactivate a dormant account.
If you want to avoid this problem, make sure that you keep track of the number of days that have passed since you last used your bank account. Make sure that you don't go at least four months without making a transaction. Generally, a bank will give you a warning a few months before actually closing it.