Can a Bank Close Your Inactive Account with Unclaimed Funds?

Many individuals are unaware that a bank can close their account for inactivity, even if there is still money in the account. This article aims to clarify the specific circumstances under which a bank might take such action and how to prevent it. Additionally, it explores the state laws and practices regarding the seizure of inactivity funds.

Can a Bank Close an Account for Inactivity?

Yes, a bank can and does close accounts for inactivity, even if there is unclaimed money. Most banks have detailed policies that define periods of inactivity, which can range from six months to several years. During this period, if no transactions are made, the bank may choose to close the account. It is crucial to note that banks’ policies can vary by institution, and it is always advisable to check the specific terms and conditions of your bank regarding inactivity.

For the majority of U.S. banks, inactivity surpassing 24 months often leads to account closure. However, certain inquiries or transactions are considered activity and may prevent dormant accounts from being inactive. These inquiries could include inquiries to open a new account, sign up for direct deposits, or even simple inquiries about the account.

State Laws and Inactivity

States also have their own regulations regarding the seizure of unclaimed funds from inactive accounts. Inactivity periods for such seizures can range from 3 to 7 years, and these laws vary by state. The legal term for such seizure is escheatment. During this time, banks have no choice but to transfer the funds to the state if they cannot contact the account holder.

I have a firsthand account of this happening. I once had a credit union account that I opened, then later left my job and forgot about the account. This resulted in the account being transferred to the state and categorized as abandoned property. The state then holds these funds indefinitely, imposing the burden on the account holder to claim them.

Search for Unclaimed Funds

If you know about unclaimed funds in a dormant account, you can proactively claim them. Numerous websites specialize in searching for unclaimed funds. These sites often provide free services that let you search for unclaimed funds in the states where you have lived or currently live.

Here are steps to follow:

Visiting IRS websites to check for undeposited tax refunds. Checking the treasurydirect.gov site for any government bonds or Series EE and Series I bonds. Using or similar websites to search for unclaimed funds.

Preventing Account Closure for Inactivity

To avoid having your account closed due to inactivity, there are several steps you can take:

Regularly use your account: Make transactions, such as deposits, withdrawals, or even online banking activities. This will keep your account active and prevent closure. Set up automatic transfers: Arrange for automatic transfers from one account to another or to your bank's bill pay system to ensure regular activity. Contact your bank: Regularly communicate with your bank to maintain a positive relationship and ensure they can reach you. Sign up for alerts: Sign up for transaction alerts via text or email to stay informed about your account activity.

By following these guidelines, you can ensure that your account remains active and avoid unnecessary issues with unclaimed funds or account closure.

Conclusion

The closure of an inactive account with unclaimed funds can be a concerning matter, but understanding the laws, policies, and best practices can help you navigate this challenge. Regular communication with your bank, keeping your account active, and utilizing free online resources to search for unclaimed funds can all help you maintain control of your financial assets.