Is it necessary to close unused savings account?
Anyone can have multiple savings accounts. A few of these accounts may actually be not in use. One of the primary reasons for not using a savings account is that of changing jobs. Most of the private companies provide salary accounts which are nothing but savings bank accounts. Once a person changes a job, usually the salary account becomes inoperative. However, there may be other reasons as well for not using a savings account.
In case you are one such person with unused saving account, there are two important concepts you need to know:
- Your account can be an inactive account.
- Your account can be a dormant account.
It is pretty natural for a person to think that an inactive account is same as a dormant account. However, there is a slight difference. An account is considered in active if the account holder does not do any transaction for a period of 12 months. At this stage the account is not dormant. As per RBI regulations, an account will be classified as dormant if there are no user-generated transactions for 24 months.
In either case, any transaction that in system generated like credit of interest earning is not considered a user-generated transaction. The list of user generated transactions include:
- ATM withdrawals.
- Cash deposits or withdrawals at branch.
- Internet banking for funds transfer or bill payments.
- Dividends deposited by the bank against Fixed Deposits held by the user.
Now the question is, ‘is it necessary to close unused savings account?’ The answer to this question is, ‘YES’.
RBI has instructed all banks to levy maintenance charges on all inactive and dormant accounts as well. This means that if you are not operating your unused savings account, you will keep accruing a yearly maintenance charge. Though it is not a very huge amount, it is still money that you owe to the banks. Over time as charges keep accruing, you will get unsolicited phone calls from your bank for payment of the dues. Usually, most banks won’t bother and eventually close the account.
However, things can get a little rusty when you apply for loans. Some banks may actually pull records of your all financial assets. This means, they can send an inquiry to the bank where the dormant or inactive account is lying. Once the records are pulled out, the lender will notice unpaid dues. This can create a negative impact on your loan application.
However, if your inactive or dormant savings account had other services like overdraft facility, things can really get nasty. How you use your overdraft facilities often determine the credit score. So, be sure that you clear all dues for overdraft facility before you decide to leave your account inactive.
Bottom line, always make sure that you close your unused savings account. Why unnecessarily pay maintenance charges? Also, no one knows what devil gets into RBI’s mind and it may come up with some nasty rule for unused savings account. Play safe! It barely takes a day to get your account closed and we are pretty sure that you can spare a few hours in a day. Head to your bank, ask for account closure form, fill it up and submit it. That’s all! Your account will be closed within a day.