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How to Avoid Inactivity Fees

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.

These fees are especially annoying on long-term savings accounts that people may not touch

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.

Why me?

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.

Fight back

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.

banks have a lot of discretion to waive inactivity fees and generally will do so for a good reason

"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.

Shop around

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."

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klink   |     |   Comment #1
Those with PenFed CD's, remember that to get the CD's you had to become a member thus establishing a share account. With the decline of PenFed rates and the strong possibility of non renewal, don't forget about your membership account. PenFed in-activity fees are based on a 6mos time frame according to a recent visit and conversation with a CSR. 
paoli2   |     |   Comment #3
Those Share Accounts with the $5.00 really confuse me.  I was told we don't have to add more to them as long as we have CDs with PenFed.  I guess the accounts stay active because our interest goes in and out of them monthly.
scottj   |     |   Comment #5
Interest does not count as activity. I have a number of accounts and just make sure to transfer  small amounts back an forth between accounts. Penfed is a great bank to use as a hub to do this since you can add as many external accounts as you like 
Anonymous   |     |   Comment #16
I don't know about that.  I haven't touched my PenFed accounts for more than three and a half years now and have yet to be charged an inactivity fee.  Unless automatic CD renewals count at owner activity. 
klink   |     |   Comment #17
Automatic re-newals do count as activity. I was told that if you have active CD's you are covered. My post was to those like myself that had CD's mature and did not renew because of the dismal rates. Also with an active Visa account and no CD's I was subject to a fee so I had to open a MM account to maintain my no fee status. Not an issue as I have a branch local that gets $0.25 every 6 months.
Anonymous   |     |   Comment #2
I just dump the ones that have fees. :)
Anonymous   |     |   Comment #4
If you don't need the account, just close it, problem solved.
Anonymous   |     |   Comment #6
Hudson City Bank in NJ marked my checking account as dormant even though interest from two CD's were deposited in it and a monthly ACH withdrawal (to pay car loan) was taken out.  The ACH was denied all of a sudden.  I immediately visited the bank branchand was told the ACH bounced because my account became dormant.  They claim that monthly ACH does not count as activity; only non-automated transactions do.  Once My CD's matures, I will end all dealing with this bank.
Anonymous   |     |   Comment #12
Just another way for banks to make money......which is fine with me.......that's their business. Everyone needs an angle.....everyone needs to scratch. If you don't like it......start your own bank.
Anonymous   |     |   Comment #13
shortest  I got is 90 days. Mostly 6 months, some 1 year or 2 years. I have monthly direct deposit for my local bank. Do need to pay attention to this, because inactivity fees and dormant fee are not obvious, and it's now charged by almost every bank.
scottj   |     |   Comment #14
Had a bank that had no fees for inactivity so didnt worry about it, kept a savings account open with $20 in case they offered any good CD deals. Got statements every month but since they always just showed that $20 balance I would just shred them without even looking closely at the. After a couple years I decided to close the account and went to branch, found out they closed the account as dormant and turned money over to state. Couldnt even get the money from state though since there was a $25 fee for this happening. Can only blame myself though since they told me before this happened I would have seen a message on my statement warning me of this but like I said, didnt really pay attention to them
Anonymous   |     |   Comment #15
In the past banks and credit unions had to send a notice to you 3 months before an account was escheated to the last mailing address on file. Has this changed? 
Anonymous   |     |   Comment #18
Look at the fee schedule and ask them about dormant accounts. Set up a calendar reminder to make sure you do an ACH transfer into or out of each institution regularly.
Anonymous   |     |   Comment #19
This is part of their business. Thius is a way to earn money. They have every right to do it. Do any of you work for free? So why do you squeal and whine about bank fees? It's no different. If you don't like it.......go somewhere else or start your own bank. Deal with it!
Anonymous   |     |   Comment #20
"How to Avoid Inactivity Fees"
Solution, close the ones you no longer need, problem solved.
Do we realy need such low level info to read and educate ourselves on what to do, just in case we have become so stupid that can no longer find a solution to such an easy problem?
scottj   |     |   Comment #21
Some of the accounts i keep open are needed as they are part of my exit plan for CDs I have at that bank. Also many of us keep open an account at a bank to be ready if they offer some special CD deal. I have no problem with banks policies, have always looked at this as a chess game. We are trying to take as much as we can from  them and they are trying to take what they can from us and playing this game means we need to stay one step ahead of them. I have made a couple mistakes in the past where they got me but I know I'm far ahead in the game
lou   |     |   Comment #22
Scott, this is the way I look at it, too. I may be fortunate, but anytime a bank or credit union has charged me a fee they have agreed to waive it. So far, so good.
Anonymous   |     |   Comment #23
Do we need lessons like this, are we that stupid not to know that by now, why we have to read irrelevant what if scenarios?
Give us more meat, not sugar free cakes (they are tasteless).
#24 - This comment has been removed for violating our comment policy.

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