
A dormant account fee is a charge imposed on bank accounts that have been inactive for a certain period of time. This period varies by bank and country, but it's typically between one to three years.
The fee is usually a small percentage of the account balance, and it's meant to encourage account holders to use their accounts or close them. Some banks may also charge a flat fee, regardless of the account balance.
In the UK, for example, a dormant account fee can be as high as £6.50 per year, as mentioned in the article. This can add up quickly, especially if the account has been inactive for several years.
If you have a dormant account, it's essential to check with your bank to see if they charge a fee and what the current balance is.
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What is a Dormant Account Fee?
A dormant account fee is a charge that some financial institutions impose on accounts that have been inactive for a certain period of time.
These fees can be quite steep, and in some cases, they can even be more than the initial deposit made into the account. Prepaid cards, for instance, can charge dormancy or inactivity fees after a certain period of time.
You might be wondering what constitutes an inactive account, and the answer is that it can vary depending on the institution. However, in general, an account is considered inactive if there are no transactions or deposits made within a specific timeframe, which can range from a few months to a year or more.
If you have a prepaid card that's been collecting dust, it's essential to check your card's terms and conditions to see if a dormancy fee applies.
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Types of Accounts Affected
Dormancy fees can affect various types of accounts, but let's break it down. Bank accounts are one of the primary targets of dormancy fees. Credit unions can also impose these fees on inactive accounts.
Some states regulate banks and credit unions, which means their rules on dormancy fees might differ. Brokerage firms can also charge inactivity fees on account holders who haven't made any transactions for a certain period.
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Credit Cards

Credit cards are a type of account that can be affected by dormancy fees, which were outlawed in the U.S. in 2010 due to changes in Regulation Z of the Truth in Lending Act.
This means card issuers can no longer charge a fee for inactivity, making it easier for consumers to maintain their credit scores.
Keeping a credit card account open can be beneficial for credit scores, as it preserves the available credit line and maintains the age of the account.
A good credit utilization ratio is 30% or less, and the lower, the better.
Card issuers can still close an account if it's inactive, but making a small charge periodically can prevent this.
It's often in the issuer's best interest to keep an account open to collect merchant transaction fees and interest again.
Gift and Prepaid Cards
Gift and prepaid cards can come with a range of fees that might catch you off guard.
Issuers can't impose a penalty on gift cards until they've been inactive for at least one year.
You'll want to check the card or certificate to see if it clearly states that it has a dormancy fee, how much it is, and how often it may be imposed.
Prepaid cards can charge a variety of fees, including monthly fees, transaction fees, ATM fees, and foreign transaction fees.
If you're the purchaser of a gift card, you'll likely have to pay a card issuance fee.
The recipient of a gift card might also be subject to fees like monthly maintenance fees, transaction fees, reload fees, and cash-out fees.
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Financial Accounts
Financial accounts, such as bank, credit union, and brokerage accounts, can impose dormancy fees on inactive accounts. These fees are typically disclosed when the account is opened, but the rules for determining inactivity vary by state and financial institution.
Dormancy fees are not the only concern for inactive accounts, as they may also be at risk of escheatment, a process where assets are turned over to the state. This is another reason to regularly review and manage your accounts.
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Banks, credit unions, and brokerage firms have some discretion in deciding when an account is inactive, but they must follow federal and state regulations. Customer accounts that are inactive for a period of time may be subject to dormancy fees, but the specific rules and timeframes can vary.
Brokerage firms can also impose inactivity fees on account holders who have not conducted any transactions for a certain period. It's essential to regularly review and manage your accounts to avoid these fees.
Prepaid cards, which act like debit cards but are preloaded with money, are also subject to dormancy or inactivity fees after a certain period of time. They can also charge a range of other fees, including monthly fees, transaction fees, and balance inquiry fees.
Dormancy fees on credit cards were once common, but changes to Regulation Z of the Truth in Lending Act outlawed them in the U.S. in 2010. This was a significant change, as it made it easier for consumers to build and maintain their credit scores by keeping accounts open even if they rarely use them.
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Fees and Charges
Dormancy fees are a penalty imposed by banks or financial institutions when a customer hasn't made a transaction on an account for a certain period of time.
Some states have varying laws regarding the ability to charge a monthly fee on dormant accounts, so it's essential to review your institution's terms and conditions.
The average monthly dormancy fee is approximately $9.60, but some institutions may charge a fee of $25 or higher.
What is a Fee?
A fee is a charge imposed by a financial institution for a specific reason. It's like a penalty for not using your account.
Some fees are triggered by inactivity, like a dormancy fee, which is a penalty for not making a transaction on an account for a certain period of time.
In the US, credit cards are exempt from dormancy fees, but other types of financial accounts and payment cards, such as gift cards, may still charge them.
Dormancy fees can be found on various types of accounts, so it's essential to review your account terms to understand what fees you might be charged.
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Monthly Fee Changes

In Missouri, a dormant/inactive savings account can be charged a fee of up to $5.00 a month after 12 months of inactivity. If a customer from another state opens an account online, the institution must abide by the state law of the customer's residence.
Missouri law requires sending abandoned accounts to the State Unclaimed Property department after 5 years of inactivity, but this doesn't apply to IRAs. If an IRA is dormant for 5 years and the customer is 50 years old, the institution doesn't need to send it to unclaimed property.
There are varying state laws regarding the ability to charge a monthly fee on dormant accounts. Some states may have stricter regulations than Missouri, where a monthly fee can be charged after 12 months of inactivity.
If a customer has multiple accounts and they are jointly titled, the institution can transfer the funds to an associated active bank account if they disclose this to their clients via electronic communication.
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Average
Average fees can add up quickly, and it's essential to stay on top of them. The average monthly dormancy fee is approximately $9.60.
Some lenders charge significantly higher dormancy fees, with some institutions charging up to $25 or more per month.
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Monthly Statement
Monthly statements for dormant accounts are still required to be sent via Reg DD, even if the account is inactive.
Dormant accounts are subject to state-defined fees, such as inactivity fees, which are allowed on accounts advertised as "free" if properly disclosed.
Reg DD doesn't specifically address debit card inactivity or online banking inactivity fees, but these fees can be allowed on "free" accounts if disclosed.
Return mail fees can also be charged on "free" accounts if properly disclosed, just like dormant account fees.
Proper disclosure is key when introducing new fees, even if they're allowed under state or federal regulations.
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Avoiding Dormant Account Fees
To avoid dormant account fees, you need to make a transaction after receiving a fee. This will demonstrate activity and prevent banks from charging you each month.
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Even a small transaction, like moving $1 into your account, can stop dormancy fees. Banks can't charge you if you've made a transaction, no matter how small.
Monthly subscriptions can help you avoid inactivity fees by forcing you to make transactions across your accounts. A single subscription per bank account and prepaid card is enough to keep you safe from fees.
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What Do Prepaid Cards Charge?
Prepaid cards can charge a variety of fees, including monthly fees, transaction fees, ATM fees, foreign transaction fees, cash reload fees, and balance inquiry fees.
Banks and prepaid card issuers make money from your transactions, so if you stop using your card, they still want to collect a fee for housing your money.
Prepaid cards can also charge dormancy or inactivity fees after a certain period of time, which kicks in because they still want to profit from storing your money.
These fees can add up quickly, so it's essential to regularly check your account balance and transaction history to avoid unexpected charges.
Prepaid cards can be a convenient way to manage your money, but it's crucial to understand the fees associated with them to avoid surprises.
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Avoid Inactivity

Inactivity fees can add up, but you can easily avoid them without breaking the bank.
To avoid inactivity fees, make a transaction after receiving a dormancy fee. This will demonstrate activity and prevent banks from charging you each month.
Some people will still receive a dormancy fee, but by making a transaction, you can shield yourself from compounding fees.
Even a small transaction, like moving $1 into your account, can help prevent inactivity fees.
Monthly subscriptions can force you to make transactions across your accounts, but you don't need to load up on subscriptions. A single subscription per bank account and prepaid card is sufficient enough.
This way, you'll record at least one transaction every 30 days and avoid inactivity fees in the process.
Dormancy fees were once common on credit cards, but changes to Regulation Z of the Truth in Lending Act outlawed them in the U.S. in 2010.
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Now, credit card issuers can't impose dormancy fees, which makes it easier for consumers to build and maintain their credit scores by keeping accounts open even if they rarely or never use that particular card.
Keeping a credit account open can be advantageous because it preserves the available credit line and helps with credit utilization ratio and age of credit accounts.
Account Activation Procedure
To avoid dormant account fees, it's essential to know the procedure for activating a dormant account. You can activate a dormant account with either or survivor instruction by visiting the branch with single identity.
If you're the sole account holder, you can simply visit the branch and provide your identity documents to reactivate your account. No need for additional instructions or paperwork.
The procedure for activating a dormant account is straightforward, and banks usually have a standard process in place. However, it's always best to check with the bank directly for specific requirements.
You can reactivate your dormant account by visiting the branch, providing your identity documents, and following the bank's activation procedure.
Understanding Fee Application
Banks charge dormancy fees because they still want to collect a fee for housing your money, even if you're not using it.
These fees kick in because banks and prepaid card issuers make money from your transactions, so anyone who stops transacting cuts off their revenue.
To avoid compounding dormancy fees, making a single transaction is enough to demonstrate activity and prevent banks from charging you each month.
A monthly subscription can force you to make transactions across your accounts, which is a simple way to stay active and avoid inactivity fees.
You don't need to load up on multiple subscriptions, just one per bank account and prepaid card is sufficient to record at least one transaction every 30 days.
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Why Banks Charge Fees
Banks charge fees because they make money from your transactions, and if you stop transacting, they cut off revenue.
They still want to collect a fee for housing your money, which is why dormancy fees kick in.
Banks and prepaid card issuers have a financial interest in keeping your account active.
In fact, anyone who stops transacting cuts off revenue from the banks and card issuers, making it harder for them to profit.
As a result, banks charge fees to ensure they can continue to make money from your account, even if you're not using it.
Transaction After Fee Received
If you receive a dormancy fee, making a transaction can help protect you from compounding fees. It's a simple solution that can save you money in the long run.
Banks can continue charging you each month if you remain inactive, but a single transaction can stop this from happening. This is especially true if you have a prepaid card or bank account that's not being used.
Moving just $1 into your account can demonstrate activity and prevent further fees. It's a small price to pay for avoiding potential losses.
Monthly subscriptions can be a convenient way to ensure you make transactions across your accounts. Even one subscription per account is enough to record activity and shield yourself from inactivity fees.
Key Information
A dormant account fee is charged by banks when an account is inactive for a certain period of time. This period varies depending on the bank, but it's typically between 12 to 36 months.
You can avoid this fee by making regular transactions or keeping a minimum balance in your account.
Banks usually send a notice to the account holder before charging the fee, but it's essential to stay on top of your account activity to avoid any surprises.
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Sources
- https://money.stackexchange.com/questions/112497/legal-to-apply-dormant-account-fees-until-the-account-overdrafts
- https://www.investopedia.com/terms/d/dormancy-fee.asp
- https://money.stackexchange.com/questions/135427/legality-of-bank-inactivity-fees
- https://www.moneylion.com/learn/what-is-a-dormancy-fee/
- https://www.bankersonline.com/operations/dormant-accounts
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