Beware of Inactivity Fees at Your Bank or Credit Union

With interest rates so low these days, the last thing a saver needs is to be hit with fees. There's a common fee that banks often do not clearly disclose that can easily sneak up on you. It's the inactivity fee. Many banks and credit unions will charge your savings or checking account a monthly inactivity fee after a certain period of time in which there are no customer-initiated deposits or withdrawals.

A reader just reported that his Mega Money Account at AmericaNet Bank has been hit with a $10/month inactivity fee. I called the bank, and confirmed that they do charge a $10/month inactivity fee. According to the CSR, the fee starts after 6 months of inactivity. This policy also applies to Redneck Bank and Evantage Bank. All three of these banks are owned by the same family and have the same policies.

In this March post I described being hit by inactivity fees at Patelco Credit Union and my local credit union. So it's not just banks that charge inactivity fees. If you notice such a fee, be sure to request a courtesy reimbursement. The longer the time after the fee, the less chance you'll be able to get a reimbursement.

You can prevent an inactivity fee by making any type of deposit or withdrawal. It's easy to do, but it's also easy to forget. One way you can avoid forgetting is to set up automatic monthly transfers to or from the account. This is where an internet bank like Ally can be very handy. Ally Bank allows an unlimited number of links to other bank or credit union accounts. Once a link is established, you can set up re-occurring automatic transfers. For example, you could set up transfers so that $5 will be transferred each month from Ally to your other bank. If you want to keep the balance at the other bank small, you may also want to set up these transfers in reverse ($5 to be transferred each month from your other bank to Ally). The only potential problem is that you don't want to go over 6 non-ATM withdrawals from Ally's savings or money market account. However, Ally Bank's interest checking does not have this limitation.

Another way to prevent inactivity fees is to close the account. In my last post on inactivity fees, the reader 51hh commented on how he decides when to close an account:

My position on this is to always close accounts when not used due to low rate, etc. This action makes things a lot simpler in terms of tax reporting, account management, as well as inactivity fee.

If you are thinking about closing an account, don't forget about a potential account closure fee. Most banks only charge account closure fees if you close an account before 6 months of account opening. However, each bank has its own policy on this.