Refunds And Closed Bank Accounts: How To Avoid Losing Your Money

Have you ever imagined what happens if your refund money gets credited into your closed bank account? Well, this can be tricky and quite confusing. In this blog, we will tell you what needs to be done in such a scenario and also tips to avoid these mishappenings. 

Awareness of problem

In recent years, India has seen a significant boost in the number of digital payment users. The issue related to refunds that are directed to closed bank accounts has also been raised notably. When the refunds are issued to closed bank accounts, the amount gets stuck in the banking system and is typically named as unclaimed funds by the bank. Generally, these scenarios come into play when the purchased goods are returned to the seller, cancelling any services or sometimes it might be a tax refund.

What happens to a refund?

Usually, when the refunds are redirected to the closed bank account, the banks reject these transactions. That doesn’t mean that the money is lost. These funds are reverted to the entity that has initiated the transaction. The time taken for this kind of transaction is mainly dependent on the banks and their policies.

Steps to avoid losing money

1. Update Payment Information

Provide accurate and active account information to avoid issues related to refunds to a closed account. Make sure to provide new bank details to employers, online platforms, and other service providers whenever you close bank accounts.

2. Track Your Transactions

If you are anticipating any refunds, it is important to keep track of your transactions. It helps you identify if the funds are misdirected to a wrong or closed bank account.

3. Prescient Communication

In case, if the refunds are redirected to the closed bank account, make sure you contact the issuing entity at the earliest. Also, provide them with updated and accurate bank information.

Also read: Exploring The Options For International Money Transfer Through Axis Bank

4. Understand Your Bank Policies

It is always important to get familiar with your bank policies. Certain banks allow their customers to claim back their refund amount on their closed account by providing a dedicated window for a specific period, instead of rejecting the transaction.

5. Notify Parties Before Closing Account

Notify the refund issuing agency in advance if you are closing the bank account. Furnish them with new bank details or any other alternative account for receiving the refunds in the future.

Steps to be followed if the refund is redirected to a closed account

• Contact Issuing Agency: Inform the refund issuing agency about the closure of the provided bank account. Submit the closure document provided by the bank to the refund issuing agency for confirmation of the bank account.

• Intimate Your Bank: If the refund is issued by the agency, contact your bank where the account was closed. Provide them with all the proof of the transaction such as transaction details from the issuing agency.

• Provide Alternative Account: Upon informing both parties involved in the transaction, provide them with new or alternate bank account information to direct the refunds to the account.

Legal Structure in India

As per guidelines of the Reserve Bank of India (RBI), the refunds of the transactions in which closed or inactive accounts are reverted by banks should be treated correctly and must be paid to the active accounts that have been provided by the customers.

Way Forward

Although refunds to closed bank accounts may cause hassle, being proactive and knowledgeable can help prevent these unpleasant situations. Consistently updating banking details, tracking account status, and quickly addressing any problems that may occur can guarantee the safety of your funds. In the dynamic financial landscape of India, having knowledge of your rights and the mechanisms available for redressal can help you manage your finances properly and not end up losing your earnings.