What Is a Dormancy Fee? How Much It Costs and How to Avoid One

A dormancy fee is a charge a bank or prepaid card issuer applies after an account sits inactive for a set period, typically six to twelve months.

Fees usually run $5 to $15 per month, banks must disclose the fee and timeline before charging it, and a single transaction resets the inactivity clock.

MoneyLion

A lender prequalifies you. What's important to remember?

Funds are guaranteedFinal approval may differRates cannot changeNo review is required

60

Key Takeaways

• Most dormancy fees kick in after six to twelve months of inactivity. Some banks wait as long as two years, so the exact window depends on your account agreement.

• Typical fees run $5 to $15 per month, though some institutions charge as much as $20 to $25.

• Credit cards can't be charged dormancy fees. The Credit CARD Act of 2009 banned the practice for credit cards, though checking, savings and prepaid accounts are still fair game.

• A single transaction usually resets the clock. Even moving $1 into your account can prevent the next fee from being charged.

• Long-term inactivity can lead to escheatment. After three to five years without activity, depending on the state, banks are legally required to turn remaining funds over to the state as unclaimed property.

• Banks must notify you before and during the process. Federal and state rules generally require disclosure of the fee terms and an attempt to contact you before your account is escheated.

Summary generated by AI, verified by MoneyLion editors

What Is a Dormancy Fee?

A dormancy fee, also called an inactivity fee, is a charge that banks, credit unions and prepaid card issuers apply to accounts that show no customer-initiated activity for a set period of time. Activity generally means deposits, withdrawals, transfers or other transactions you initiate yourself. Interest credited automatically to your account doesn't count as activity that keeps it active.

Banks charge dormancy fees for a straightforward reason: an inactive account still costs money to maintain, and it stops generating the transaction revenue that active accounts typically produce. Under federal law, both banks and credit unions can apply these fees, but they must disclose the fee amount, the frequency and the inactivity window when you open the account.

Dormancy Fees by Account Type

Exact windows and fee amounts vary by institution and by state, so check your account agreement or ask your bank directly for current terms.

It's worth noting that the 12-month floor is a federal requirement specifically for gift cards; general-purpose reloadable prepaid accounts can set a shorter inactivity trigger, as long as it's clearly disclosed, according to the Consumer Financial Protection Bureau.

How Does a Dormancy Fee Work?

The dormancy process typically unfolds in stages.

First, an account is flagged as inactive, usually after six to twelve months without a deposit, withdrawal or transfer. At that point, many banks start applying a monthly inactivity fee, often disclosed in the account's fee schedule.

If the account remains untouched for a longer stretch, generally another one to several years depending on the institution and state, it can be reclassified as dormant, and the bank is required to attempt to contact you before taking further action.

Banks and card issuers must tell you if they charge dormancy fees, along with the time frame before the fee applies, so reviewing your account terms and conditions is the fastest way to know exactly what to expect from your specific bank.

What Happens if an Account Stays Dormant Too Long?

If an account remains inactive well beyond the dormancy fee stage, typically three to five years depending on the state, the bank is legally required to stop simply charging fees and instead turn the remaining balance over to the state through a process called escheatment. This isn't the bank keeping your money. The state holds it as unclaimed property, and in most states there's no time limit on reclaiming it once you're ready.

Before that happens, banks generally must try to notify you, often by mail to your last known address. If you've lost track of an old account and think it may already have been escheated, MoneyLion's guide on how to find old bank accounts in your name walks through the free federal and state tools you can use to track it down and file a claim.

MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms and fees from different lenders and choose the best offer for you.

How Do You Avoid a Dormancy Fee?

1. Make one small transaction every 90 days: Set a recurring calendar reminder to deposit, withdraw or transfer even a small amount, since a $1 transaction is often enough to reset the inactivity clock.

2. Check your account agreement for the exact inactivity window: Windows range from as short as three months to as long as two years depending on the bank and account type, so don't assume your bank follows the industry average.

3. Set up a small recurring subscription or automatic transfer: A low-cost, recurring charge tied to the account creates regular activity without requiring you to remember to log in.

4. Review your statements every month: Scanning for fee line items early lets you catch and address a new dormancy fee before it compounds.

5. Keep your contact information current: Many banks try to reach you before charging a fee or escheating an account, so an outdated address or phone number can mean you miss that warning entirely.

6. Close accounts you no longer plan to use: If you've switched banks and have no intention of returning to an old account, closing it outright avoids the fee question altogether.

Can a Dormant Bank Account Be Reactivated?

Yes. Most banks let you reactivate a dormant account by contacting customer service or visiting a branch, though the exact process varies by institution.

If your account has already been escheated to the state, you'll instead need to file a claim through your state's unclaimed property office, which is free and generally has no deadline.

Common Mistakes to Avoid

• Assuming automatic deposits count as activity. Some banks don't count system-generated deposits, like interest, as the customer-initiated activity needed to avoid a fee.

• Ignoring old accounts after switching banks. An account you forgot to close can still rack up fees or eventually get escheated even if you're no longer using it.

• Missing the bank's notice. An outdated mailing address or phone number means you could miss a warning that your account is about to be charged a fee or turned over to the state.

Want to Avoid Dormancy Fees Altogether?

A MoneyLion Spend Account is built around everyday use, with features like early direct deposit that help keep your account active without extra effort. If you're between paychecks and worried about letting an account sit too long, Instacash cash advances have no mandatory fees and no interest.

MoneyLion is a financial technology company, not a bank. Instacash is an optional service offered by MoneyLion; terms and eligibility requirements apply. See Instacash Terms and Conditions for details.

Bottom Line

A dormancy fee is what banks and card issuers charge after an account sits inactive for six months to a couple of years, and the fastest way to avoid one is a small, regular transaction that keeps the account active. If an account stays dormant long enough, the funds don't disappear. They eventually move to the state as unclaimed property, and you can generally reclaim them at any time.

Reviewing your statements, keeping your contact information current and closing accounts you no longer need are the simplest ways to stay ahead of both the fee and the escheatment process.

Key Terms

• Dormancy fee: A charge applied to an account after a set period of customer-initiated inactivity, often called an inactivity fee.

• Dormant account: An account with no deposits, withdrawals or transfers for an extended period, typically one to five years depending on the institution and state.

• Escheatment: The legal process of transferring unclaimed funds from a dormant account to the state government, which then holds the money for the rightful owner.

• Unclaimed property: Money or assets, including dormant bank account funds, that a bank turns over to the state after a set period of no owner contact.

• Credit CARD Act of 2009: The federal law that banned dormancy or inactivity fees on credit cards, though it doesn't apply to checking, savings or prepaid accounts.

• Customer-initiated activity: A transaction you actively start, such as a deposit or withdrawal, as opposed to automatic activity like interest credited to your account.

Summary generated by AI, verified by MoneyLion editors

Sources

• Office of the Comptroller of the Currency: When Is a Deposit Account Considered Abandoned or Unclaimed? (HelpWithMyBank.gov)

• Consumer Financial Protection Bureau: Will I Be Charged a Fee if I Don't Use My Prepaid Card?

• Consumer Financial Protection Bureau: Regulation E, Requirements for Gift Cards (12 CFR 1005.20)

• National Association of Unclaimed Property Administrators: Property Type Dormancy Periods

Summary generated by AI, verified by MoneyLion editors

FAQ

Here are quick answers to common questions about dormancy fees:

How long does a bank account have to be inactive to be charged a dormancy fee? Most banks begin charging dormancy fees after six to twelve months of inactivity, though some wait up to two years. The exact window depends on your bank and account type, so it's worth reviewing your account agreement or fee schedule for the specific terms that apply to you.

Can you get dormancy fees refunded? Some banks will waive or refund a dormancy fee, especially a first occurrence, if you contact them and reactivate the account. There's no legal requirement for a bank to refund the fee, but it's common enough that calling customer service directly is worth the few minutes it takes.

What happens to a dormant bank account after years of inactivity? After typically three to five years of inactivity, depending on your state, banks are required to turn the remaining account funds over to the state government through a process called escheatment. You can generally reclaim that money at any time by filing a free claim through your state's unclaimed property office.

Do dormancy fees apply to credit cards? No. The Credit CARD Act of 2009 banned dormancy and inactivity fees on credit cards specifically. Checking accounts, savings accounts and prepaid cards, however, can still carry these fees depending on the issuer's policy.

How can I quickly reactivate a dormant account? Contacting your bank's customer service line or visiting a branch is usually the fastest way to reactivate a dormant account, since most banks just need you to confirm your identity and make a transaction. If the account has already been escheated to the state, you'll need to file a claim with your state's unclaimed property office instead.