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Watch out for those hidden inactivity fees from your bank and credit union

Updated: Jun 1, 2021

"Often called a dormancy or inactivity fee, these fees which varying in amount will be charged by banks when accounts are not being used, even if there is money in the account! We also provide you 3 great questions to ask when opening a bank account."

By Allan R. Kirby

Hiden fees, Dormancy or inactivity fee, are fees that will be charged by banks when accounts are not being used. Watch out for Bank fees.

Watch out for those inactivity fees at your local Bank or Credit Union

Yes, we are talking to you about one of those hidden fees you may not be aware of. It's one that seems to catch many people off guard which is a monthly fee that is charged to your account because of inactivity or the account is considered dormant. Basically how it works is if you do not use your account for deposits, withdraws, transfers, or bill payments for an extended period of time, a fee will kick in.

The timeline for when this type of fee starts to be charged to your account varies considerably from one financial institution to another but generally speaking I have found 6 months is a good average but again each institution is different. Additionally, in terms of how much is charged, this also varies from bank to bank, but it appears that the fee amount can be as low as $5 to over well over $10 per month.

Every Financial institution is different for example some major banks such as J.P Morgan, Bank of America, Wells Fargo, and Citi do not charge a dormant fee but many smaller banks do charge a fee for accounts not being used. Keep in mind an inactivity fee is different from a monthly account maintenance fee, so if you charged a fee that fee may not be a dormancy fee, it could be a fee due to not maintaining a minimum balance.

Have an account only used for emergencies or for saving for something big like a vacation, check for inactivity fees!

Check your bank's policies

Check with your bank. Some banks may not charge anything so long as you have a minimum balance or do a minimum number of transactions per month. However, if you're really not using the account for anything, just close the account, there is no point in having an account that is not needed, and why give the banks money. Better to close the account and just keep your money.

Not using the account - Close it!

Don't like the bank's policies? Then simply move your money if you are not happy being charged fees for inactive accounts. The financial service industry is highly competitive so it's not difficult to find another bank that can better meet your banking requirements.

Have a small emergency fund account

One way I have seen consumers getting caught with fees is when they set up an account for an emergency fund which is likely not to be used often. I did this, I found a bank with a great high-interest savings account and no minimum deposit and no monthly fees, except for the inactivity fee. I only found out about the inactivity fee by asking, it's one of those fees customers tend not to ask and can be missed. Surprisingly sometimes even the teller may not know about these types of fees so it's good to ask. In my case, all I need to do was to set up an automatic transfer every month of $1 to keep my account active.

Weekly or monthly automatic transfers will do the trick!

What to Ask a Bank or Credit Union when opening an account

As I just mentioned, I only found out about the inactivity fee by pressing the staff and asking questions. So here are a few equations to ask when opening up a bank account. If you open an account with an online bank, you should still look for answers to these questions as well.

#1 Fees

What are the bank's / credit unions' fees? Financial institutions can still charge fees even if the account you are opening says for example "No fee savings account". There could be fees that you may incur which you are not aware of:

Minimum Balance Requirements.

Monthly Account maintenance fees

Out of network ATM fees

Overdraft fees.

Nonsufficient Funds (NSF) Returned deposits, bounced checks.

Foreign transactions fees.

Personal checkbooks.

It's easy to read the basic fee information for bank accounts the bank or credit union will provide you, however, it's the fine print that you need to take a closer look at.

#2 Interest on deposits

What's the interest rate I will receive for my deposits? Generally speaking, you will earn interest on your deposits for most savings and checking accounts. However, the amount you will receive from bank to bank will vary considerably. It's a good idea to ask about the rates, you may find a better rate somewhere else.

#3 Travelling

Will I be able to access my money when traveling? This is an important question, especially if you are going to be traveling internationally. In some cases, it's not a problem, if you bank at one of the larger national-sized banks, several of them do have agreements with financial institutions in other countries, possibly one you are visiting. This happened to me, when I visited Australia, my bank had an agreement with one of the larger Australian banks, as a result, I able to use the Australian bank and ATMs and paid no fees.

You may be surprised some smaller banks and credit unions may also have agreements with financial institutions in other countries, but it's likely to be limited. In any case, you do need to make sure you will be able to access cash and use your debit cards if you plan to use them while traveling. Always check in advance and make sure you understand what you need to do if you're unable to access your money or worse, how to replace your cards if they are stolen.

Final Thought

We do not get much with our money these days in a low-interest environment, so we want to do what we can to protect what money we have. This is why it's important to always check your accounts and/or ask your bank about all the possible fees. Sometimes banks may not disclose fees simply because they may forget to let you know, but regardless if they do or not, always ask to get your money back if you catch it quickly. You can simply go to another bank if you do not like their fees and services.

Good luck!


This is a blog written by Allan R Kirby, who writes and produces investment and personal finance articles and videos.



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