Why your bank account might be charged an inactivity fee

An account you are not using can still cost you money, and in a small number of cases it can be emptied and handed to the state. Both of those things surprise people, and both are entirely legal.

I explained this across a desk in Charlotte for eleven years and it never stopped being an awkward conversation, because the customer is right that it feels wrong.

The fee

A dormancy or inactivity fee is charged when an account has had no customer initiated activity for a set period. The period varies by bank and by account type, and six to twelve months is common.

The critical phrase is customer initiated. Interest posting does not count. An automatic monthly maintenance fee does not count. A statement being generated does not count. The bank's own activity on your account is not your activity.

Even logging in to check the balance often does not count, depending on the institution, because they are looking for a transaction rather than a visit.

So an account can look busy on the statement and still be dormant in the bank's eyes.

The fee is disclosed in the account agreement and in the fee schedule, which is the document nobody reads and which the bank can change with notice. If you have held the account for fifteen years, the terms you agreed to then are not necessarily the terms now.

Where it gets worse

If nobody touches the account for long enough, usually three to five years depending on your state, it is presumed abandoned. The bank is then required by state law to turn the balance over to the state, a process called escheatment.

The money is not gone. States hold it indefinitely and you can claim it back. But the account is closed, the claim process takes weeks, and if you did not know it happened you may spend a while thinking the bank lost your money.

Before escheating, the bank is required to try to contact you, generally by post to the last address they hold. Which is why an old address on a dormant account is the thing that turns a small problem into a real one.

Who this actually happens to

It is almost never somebody's main checking account.

It is the savings account opened for a child who is now twenty-eight. The account at the old bank kept open after moving to a new city. The account holding a security deposit. The account an elderly parent opened at a branch that closed, which the family knows nothing about.

And increasingly it is accounts opened online for a sign up bonus and then forgotten.

How to stop it

Any small real transaction resets the clock. A one dollar transfer in or out, once every few months, is enough at most institutions.

The cleanest fix is an automatic transfer. Set up two dollars a month moving in from your main account. It costs nothing, it runs by itself, and it keeps the account demonstrably active.

A tiny recurring direct debit works the same way. Some people route a five dollar subscription through the account for exactly this reason.

Keep the address and the email current on every account you hold, not just the one you use. This is the single most valuable thing on this list, because it is what makes the warning letter arrive.

And write down every account you have. Bank, type, approximate balance, roughly when you opened it. One sheet of paper in the same place as your will. The accounts that get escheated are overwhelmingly the ones nobody in the family knew existed.

Getting a fee reversed

Call and ask. Say the account was dormant, you were not aware of the fee, and you would like it refunded.

For a first occurrence at an institution where you hold other accounts, this usually works. Banks have discretion and they use it, particularly if you are in good standing.

If the fees have been running for a year, expect them to refund some and not all. Take what is offered and then either close the account or set up the automatic transfer.

Checking for money you have forgotten

Every state runs an unclaimed property office and searching it is free. Go to missingmoney.com or your state treasurer's website, and search every state you have ever lived in under every version of your name, including a maiden name.

It takes ten minutes. I have had members find four figures doing it, and the most common reaction is not delight, it is confusion about what the account even was.