Inactivity Fee
Inactivity fee summary:
An inactivity fee is a type of junk fee that can make managing your money more expensive.
If you don’t make any deposits, withdrawals, trades, or other financial transactions for a set period of time (often six months to a year), you might be charged an inactivity fee.
You can avoid inactivity fees by reading fee schedules for any account you’re considering opening and closing financial accounts when you’re finished using them for good.
Inactivity fee definition and meaning
When you open a bank or other financial account, the bank or other institution that holds your account might charge you a host of fees. One such charge is an inactivity fee (also called a dormancy fee), which could be assessed if you stop using the account to receive deposits, pay bills, or make other transactions.
Key concept: An inactivity fee is a type of junk fee you might incur if you don’t use a financial account for a certain period of time (typically six months to a year).
Inactivity fees: a comprehensive breakdown
You might incur inactivity fees if you stop using your regular bank accounts (checking, savings, money market). You could also be charged for not making any trades or adding any cash to your investment account for a long time. If you use a prepaid card to pay bills or shop online, you could also be charged an inactivity fee.
Inactivity fees are usually relatively modest amounts (often $5 to $20), but that’s still cash you could be using for bills, paying off debt, or building your emergency fund. An inactivity fee is an example of a junk fee, and part of the Consumer Financial Protection Bureau’s mission during the last few years was stamping them out to save Americans money. If you feel you’ve been charged unfairly, you can contact the CFPB for help if the financial institution is unresponsive.
How to avoid inactivity fees
Spotting a charge for an activity fee on a bank account you no longer use can be a wake-up call. Here’s how to avoid the extra cost.
Close the account if you’re not using it
Banks are always improving their services to compete for your business, so shop around for a new account every year or two. If you find a better deal, close your existing account.
Read the fee schedule
Financial institutions that accept deposits are required to tell you about the account fees they charge. Find out how much you’ll be charged for inactivity (or if you’ll be charged at all—ideally, you won’t) before deciding to do business with that bank.
Set up direct deposit or autopay
Work with your employer to set up direct deposit for your paychecks. You can also pay bills every month via automatic debit. You won’t have to worry that your account is going dormant, and as a bonus, using autopay for regular bills could help you avoid forgetting a bill is due and neglecting to pay it.
Inactivity Fee FAQs
Will I be charged an inactivity fee on a credit card?
No. Under the terms of the 2009 CARD Act, credit card issuers are no longer allowed to charge fees if you stop using the card. However, your issuer might close your credit card account if you don’t use it for a period of time, and they aren’t required to notify you in advance. So if you want to keep the account, use it periodically.
What other fees do banks charge?
Depending on the bank, if you open an account, you might be subject to these common fees:
Monthly maintenance fee
Overdraft fee
Nonsufficient funds fee
ATM usage fee
Wire transfer fee
Do fee-free banks exist?
Yes. Online banks in particular often operate without extracting some of the common fees you might be charged by a brick-and-mortar bank, since they have lower operating costs. Do your research if you’re looking for a new bank—opening an account that is fee-free could save you both money and hassle.
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