Sometimes, doing nothing is costly. Silence isn’t golden for bankers. They want you "transacting". Be quiet (no deposits or withdrawals) for too long, and you can get hit with inactivity fees.
Dormant account fees can be charged after six months of dormancy, up to three years, and range from $1-$12 per month of inactivity, according to a report last year from the Consumer Federation of America, Savings Accounts: Their Characteristics and Usefulness.
Despite fee weary consumers, "My sense is that inactivity fees are increasing," says Stan Orszula, a partner in the corporate services practice group of the law firm Quarles & Brady. There are a few reasons. "Banks have increased and regulatory transactional costs. Complying with these laws and regulations cost time and money," he says.
Simply put, "Banks have to help offset their costs," explains Nessa Feddis, senior vice president, consumer protection and payments for the American Bankers Association.
When a bank raises its fees overall, this includes inactivity fees, especially if a bank has low quarterly profits and didn’t meet their annual profit goals, explains Harrine Freeman, author of How to Get Out of Debt and head of H.E. Freeman Enterprises, which provides financial counseling.
Inactive fees can be charged on savings accounts and prepaid cards. "These are egregious fees designed to eat away at a consumer’s balance. These fees are especially annoying on long-term savings accounts that people may not touch," says Ruth Susswein, deputy director, national priorities, Consumer Action.
Know the facts
There is confusion between dormant and inactivity. A dormant account is based on the internal policies of a bank and is not defined by law. On the other hand, says Freeman, an inactive account is defined by law, based on state or federal laws such as FTC or SEC. A dormant account can remain in this status for up to one year. After that, it is considered "inactive," she explains.
Find out what your bank considers to be dormant. National banks can charge a fee on an inactive or dormant account, but once an inactive account has been moved to "unclaimed property," status fees can no longer be charged, says Freeman.
When you don’t use a bank account for a specific period of time set by the bank, your bank can charge a dormant or inactive account fees. "These fees generate revenue for the bank and help banks comply with state abandoned property laws escheatment). State laws require banks to surrender funds held in dormant or inactive bank accounts to the state after a specified period of time," says Freeman.
However, the good news is, banks have a lot of discretion to waive inactivity fees and generally will do so for a good reason, says Orszula. Sometimes, if you keep a certain minimum balance, the bank will waive the fee.
"Read the disclosure statement or view the bank’s website to see the list of fees to see if the bank accurately charged you an inactive bank fee. Verify if the fee was charged in error," says Freeman.
Don’t just rely on the telephone. "Visit your local branch and bring your recent bank statement. Ask to speak to the manager and ask if the fee can be waived and your account can be returned to an active state. Remind them you are a loyal customer," says Freeman.
You can also transfer money from another account monthly, or do direct deposit of your paycheck to keep your account active.
Consolidate. Consider consolidating your bank accounts into one or two banks, at the most, says Freeman.
Wells Fargo spokesperson Richele Messick says Wells Fargo does not charge an inactivity fee for any of its consumer deposit accounts.
Amanda Landers, spokesperson for Capital One Bank says Capital One Bank and Capital One 360 don’t charge inactivity fees. "Periodically, the bank may review account use, notify the customer that the account is inactive, and then close the account if there is no response from the customer," says Landers. Accounts are considered inactive or dormant if a customer hasn’t initiated contact or a transaction with the bank for more than two years.
Says Susswein, "Move your money to a bank that doesn’t hit customers with these offensive fees."