What Happens to Dormant Accounts

by John Stevenson on November 16, 2013

A dormant account is a low-balance savings account that is inactive over a specified period of time. In Canada, dormancy usually occurs after a 1-year period of inactivity. Under the Bank Act, accounts are transferred to the Bank of Canada after a dormancy period of 10 years.

Definition and Reasons

A savings account is considered dormant if statements or letters are returned to the financial institution, the bank’s attempts to contact the customer are unsuccessful, and the account is not used over a long period of time. Many customers lose track of accounts for a variety of reasons. Some get married and change their name while others move house and fail to notify their financial institution. This also happens to accounts that have been opened for children and they lose track because the original paperwork is missing. The merger between different financial institutions is yet another reason why it is difficult for holders to track down their money. Some people keep an account open because they have a small amount in it. Closing it takes time. Dormancy may occur when a person passes away or moves abroad.

What Banks Do

These accounts are not available to new customers. When an account has been dormant for 1 year or longer, the financial institution will contact the holder to ask whether they wish to use it in the future. The bank will no longer attempt to contact the holder if attempts to send correspondence fail. In this case, the account is considered dormant. The reason for this is that it doesn’t make sense to send monthly statements to holders. This increases the risk for fraud and identity theft.

How to Reclaim Funds

The timeframe varies from state to state. The account is turned over to the state authorities through a process called escheating. Still holders are free to contact their state to reclaim their deposit (and interest). The problem is that it may take months before the customer reclaims the funds. Before the specified period is over, the customer may visit a local branch or use telephone banking to request reactivation.

How to Avoid Dormancy

The most important thing to do is to review your monthly statements on a regular basis. Another option is to schedule payments or to set automatic transfers to keep the account active. Many customers also rely on money management software to keep track of their balances. It is important to keep your financial and personal information up-to-date or you risk missing notifications. Poor record keeping is one of the main reasons why thousands of accounts lie dormant. Moreover, some financial institutions still charge fees while customers don’t have access to their money.

Relater Articles:

Avoid Dormant Accounts with Prepaid Credit Cards

Prepaid Credit Cards – Mastercard®

Comments on this entry are closed.

Previous post:

Next post: