Opening a brand-new savings account marks one of the initial steps into personal banking. You may deposit funds into a reliable savings account and expand the amount you possess over time. Additionally, it is crucial to have access to additional financial products and services like loans, insurance policies, EMIs, paying bills, e-wallets, and more. Most consumers open several savings accounts at various banks to take advantage of the beneficial capabilities. Nevertheless, many only use some accounts frequently, while others remain unused for months or years. A zero balance saving account is an excellent option for account holders with low activities!
What is an Inactive or Dormant Account?
A dormant account has not experienced any transactions for a long time except for interest posting. State rules oblige financial institutions to transfer the funds stored in inactive accounts to the government’s treasury once those accounts have remained dormant for a predetermined time.
Checking and savings accounts, 401(k) accounts, brokerage accounts, pension fund accounts, and other accounts for monetary assets are examples of the best bank account in India that might go dormant.
It is standard practice to have many savings accounts in your ownership but only keep some of them operational. After all, it might be challenging to maintain track of numerous savings accounts. However, failing to manage your dormant savings accounts will cost you a lot. On the other hand, a zero-balance saving account is low-maintenance.
Reasons Why You Shouldn’t Have a Dormant Account
The key four reasons for not having an unused savings account are as follows:
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The Account Becomes Dormant or Inactive
According to RBI regulations, any savings account with no transactions for 24 months is declared inactive. That implies that you must submit the request and the required KYC paperwork for the reactivation to use the funds. The remaining amount and interest are transferred to the RBI’s Depositors’ Education and Awareness Fund if the savings account is inactive for ten years. Additionally, you will need to sift through a tonne of paperwork to get your money back.
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Penalties by the Bank
To avoid penalties, your savings account must maintain a minimum amount if it is not a zero balance saving account. There is an increased chance that you cannot keep the required minimum balance in your Savings Account while it is inactive. The remaining balance can eventually run out if you don’t have enough money. As a result, you will lose the amount of interest earned in your savings account.
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No Rewards and Benefits
A zero balance saving account is more than a safe place to save money. It is usually provided with reward points, distinctive initiatives, and facilities like sweep-in Fixed Deposits. It has the potential to allow you to generate a great deal more money via transactional actions in the account.
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Waste of Investment Opportunities
In an easy-to-access zero balance saving account, your money builds up interest over the course of time. Additionally, you can make investments effortlessly with a savings account, like an auto-fixed deposit that increases your interest earnings. If the savings account is inactive, though, you can miss out on this automated saving and the chance to earn greater interest rates. You thus miss out on more money.
What Happens to a Dormant Zero Balance Saving Account?
Transactions from the system, such as interest credits, will no longer be effective once your bank account is inactive or dormant.
On the other hand, if the profits from a fixed deposit (FD) or a dividend on the shares you own get credited to your zero balance saving account, these actions will be viewed as customer-induced transactions. If the FD funds or dividends have been credited to the savings account, it thus will be regarded as operational.
Applying for debit cards, chequebooks, or other banking services with an inactive account will not be possible. Additionally, if your account becomes inactive, you won’t be able to change your phone number, address, or email.
In addition to the limitations of inactive accounts, dormant accounts are not eligible for ATM transactions, mobile banking, or Internet banking.
Conclusion
Maintaining your savings account is simple because it only needs a single transaction each year. The most popular method for protecting and growing the money you’ve worked so hard for is to open a savings account. To prevent fees or inactivity, it is preferable to terminate a Savings Account even though you aren’t using it or to make a transaction at most once a year. Your zero balance saving account can assist you in saving money for both short-term and long-term objectives. To enjoy the greatest benefits, it must be used on a daily basis.