How do I avoid dormancy fees?

You can generally avoid dormancy fees, also known as inactivity fees, by actively using your bank account or maintaining certain account conditions.

Understanding Dormancy Fees

Dormancy fees are charges applied by banks to accounts that have been inactive for a specific period, typically ranging from a few months to several years. The purpose of these fees is often to cover the administrative costs associated with maintaining unused accounts. If an account remains dormant for an extended period, the funds may eventually be escheated (turned over) to the state.

Key Strategies to Prevent Inactivity Fees

Avoiding dormancy fees primarily involves demonstrating regular activity in your account or meeting specific bank criteria. Here are the most effective ways:

1. Regular Account Activity

Banks want to see that your account is being used. Consistent, even small, transactions can prevent your account from being flagged as dormant.

Utilize Your Debit Card

Making small, regular purchases with your debit card is an effective way to keep your account active. A simple, small transaction each month can often be enough to signal activity to your bank and prevent inactivity fees. For example, using your debit card for a coffee purchase, a streaming service subscription, or a small online order can suffice.

Set Up Direct Deposits or Transfers

Automating financial transactions is an excellent method to ensure ongoing account activity.

• Direct Deposits: Setting up your paycheck, social security benefits, or other regular income to be directly deposited into your account.
• Automated Transfers: Schedule recurring transfers from your checking account to a savings account, or vice versa, even if it's just a small amount. This also includes setting up automatic bill payments.

2. Maintain Account Balance or Relationships

Some banks offer waivers for inactivity fees based on the overall financial relationship you have with them.

Meet Minimum Balance Requirements

Many banks will waive inactivity fees if you maintain a certain minimum balance in your account. This threshold varies significantly by bank and account type, so it's essential to check your specific account terms. Keeping your balance above this specified amount ensures your account remains active in the bank's system, regardless of transaction frequency.

Hold Multiple Accounts with the Bank

If you have multiple accounts with the same financial institution – such as a checking account, savings account, credit card, mortgage, or investment account – the bank may consider your overall relationship strong enough to waive inactivity fees on any one account. This strategy highlights the value of consolidating your banking needs with a single provider.

Proactive Steps and Bank Communication

To completely avoid dormancy fees, it's crucial to understand your bank's specific policies and to be proactive.

• Review Your Account Agreement: Regularly check the terms and conditions of your bank account, particularly sections related to fees, inactivity, and dormancy.
• Set Reminders: If you have an account you don't use frequently, set a calendar reminder to perform a small transaction or transfer at least once a month or quarter.
• Contact Your Bank: If you're unsure about the dormancy policy or how to avoid fees, contact your bank directly. They can provide specific guidelines and sometimes even offer solutions tailored to your situation.

By implementing these strategies, you can ensure your accounts remain active and avoid unnecessary charges.