A dormancy fee is a recurring charge that a bank, credit union, brokerage, or card issuer deducts from an account you have stopped using, and the fastest way to avoid one is to make an owner-initiated transaction at least once a year and keep your mailing address current with every institution that holds your money. Left unchecked, the fee can drain a forgotten balance to zero and, eventually, trigger the state to take custody of what’s left.
What Counts as Inactivity
The trigger is you not using the account. Activity means something you initiate: a deposit, a withdrawal, a transfer, or at many institutions simply logging into online banking. Automatic events posted by the institution itself, like interest or dividend credits, don’t count and won’t reset the clock.
Once your last owner-initiated activity ages past a threshold set by state law or the account agreement, the account is flagged as inactive or dormant. From that point, the institution may begin taking a monthly fee out of your balance. That charge is separate from any standard monthly maintenance fee, which applies whether you use the account or not.
How Much the Fee Is and When It Kicks In
The number and the timing depend entirely on what kind of account you have.
Checking, Savings, and CDs
Dormancy on bank deposit accounts is governed by each state’s unclaimed property law rather than a single federal rule. Most states set the inactivity period at three to five years, and a long-running trend has pushed many states from five years down to three for banking products.1HelpWithMyBank.gov. When Is a Deposit Account Considered Abandoned or Unclaimed? Which rules apply to you depends on the state tied to your last known address on the bank’s records.
The monthly fee itself typically runs $5 to $25, though the exact amount is set by the institution and disclosed in the account agreement you signed at opening. A handful of states cap what can be charged; Indiana, for instance, limits dormancy charges to $0.75 per month and bars fees from exceeding the remaining balance on small accounts. Most states leave the amount to the institution.
Before turning the money over to the state, a bank is generally required to try to reach you. It sends a due-diligence notice to your last known address warning that the account has been flagged.2HelpWithMyBank.gov. Why Is My Account Being Turned Over to the State Treasurer? If that notice comes back undeliverable and you don’t respond, fees and eventual escheatment continue on schedule. Keeping your address current with the bank matters more than most people realize.
Credit unions add one wrinkle. A federal credit union that charges dormancy fees can push your balance below the required minimum share amount (the “par value”), and if that happens you get a window defined in the credit union’s bylaws to bring it back up before the account is terminated.3National Credit Union Administration. Permissibility of Closing Inactive Accounts Miss that notice and you lose the account and your membership.
Gift Cards
Gift cards get much stronger federal protection than bank accounts. Under the Credit CARD Act of 2009, codified at 15 U.S.C. § 1693l-1, dormancy fees on gift certificates, store gift cards, and general-use prepaid cards are banned unless all three of the following conditions are met at the same time:
- The card has had no activity for at least 12 months before any fee is imposed.
- No more than one dormancy or inactivity fee is charged in any calendar month.
- The fee amount, its frequency, and the fact that it applies to inactivity are clearly disclosed on the card or its packaging before purchase.
If even one of those is missing, the fee is illegal.4Office of the Law Revision Counsel. 15 USC 1693l-1 – General-Use Prepaid Cards, Gift Certificates, and Store Gift Cards The underlying funds also cannot expire for at least five years from the date the card was issued or funds were last loaded, and any expiration terms must be clearly stated.5Office of the Law Revision Counsel. 15 USC 1693l-1 – General-Use Prepaid Cards, Gift Certificates, and Store Gift Cards
Several states go further. Maine bans all fees on gift cards except a one-time transaction fee at purchase; California prohibits fees on gift cards except a narrow $1-per-month exception when the balance drops below $5, the card is reloadable, and it has been unused for 24 months. Where a state rule is stronger than the CARD Act, the state rule controls.
Reloadable Prepaid Cards
General-purpose reloadable prepaid cards that are not marketed as gift cards fall under Regulation E, § 1005.18, enforced by the Consumer Financial Protection Bureau. These cards are not covered by the CARD Act’s gift card fee rules, but issuers must disclose any inactivity fee on the card’s short-form disclosure before purchase.6eCFR. Part 1005 Electronic Fund Transfers (Regulation E) For cards sold in retail stores, that disclosure must be visible on the outside of the packaging, not tucked inside it.7Consumer Financial Protection Bureau. 1005.18 Requirements for Financial Institutions Offering Prepaid Accounts Inactivity charges on reloadables aren’t capped the way gift card fees are, so check the fee schedule before you rely on one.
Brokerage Accounts and IRAs
Investment accounts follow their own dormancy rules, and the stakes are higher because the assets are usually worth more. Inactivity periods vary by state and asset type, but the general mechanics track bank accounts: stop initiating transactions, become unreachable, and the account can be declared dormant.
The important difference is what escheatment does to your investments. A state may require the brokerage to liquidate your securities and remit cash rather than the shares themselves. If that happens you lose your market position, and even after you reclaim the money you will have missed whatever dividends, interest, or price appreciation occurred while the state held it.8FINRA. Avoiding and Recovering Unclaimed Investment Assets
IRAs add a further layer. Dormancy periods generally run two to seven years depending on the state, and the clock is often tied to required minimum distributions. You must begin taking RMDs starting the year you turn 73.9Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs If you reach that age and don’t take a distribution or contact the custodian, many states treat the missed RMD as the event that starts the dormancy countdown. A few states will also look at pre-RMD inactivity, such as returned mail or a total absence of contact, and can begin escheatment before you reach RMD age.
How to Keep the Fee From Starting
Using the account is the whole game. Any owner-initiated transaction resets the dormancy clock: a $1 transfer, a small withdrawal, or at many institutions simply logging into the online portal. One transaction per year is enough at most banks, but confirm your institution’s definition of activity in the account agreement, because “logging in counts” is not universal.
A few habits reinforce that:
- Update your mailing address, email, and phone number at every institution every time you move. When a due-diligence notice bounces back, the path to fees and escheatment accelerates.
- Close or consolidate accounts you no longer use. Three banks and an old brokerage account from a decade ago is a setup for one slipping through.
- Once a year, run through every financial account you own, including gift cards sitting in a drawer. A quick login or small transaction is cheap insurance on anything you want to keep alive.
- Spend gift card balances well before the 12-month inactivity trigger. Federal law gives you at least five years on the funds themselves, but using the card is simpler than tracking the disclosure.
What Happens If You Ignore It
Two things can go wrong beyond the fee itself.
First, if fees drain the account to zero or push it negative and the institution closes it, the unpaid balance can be sent to a collection agency. That collection entry lands on your credit report and stays for seven years from the original delinquency date, whether or not you eventually pay it. Banks also report forcibly closed accounts to specialty consumer reporting agencies like ChexSystems, and a negative ChexSystems record can block you from opening a new checking or savings account at most banks and credit unions, since the majority pull that report during the application.10ChexSystems. ChexSystems Frequently Asked Questions Getting locked out of mainstream banking over a forgotten $200 savings account is a real outcome.
Second, if the account stays dormant through the full inactivity period set by state law, the balance is escheated: legally transferred to the state’s unclaimed property division.1HelpWithMyBank.gov. When Is a Deposit Account Considered Abandoned or Unclaimed? Escheatment is not forfeiture. The state holds the money as custodian, your right to it does not expire, and your heirs can claim it after your death. But the practical costs are real: bank accounts are closed and remitted as cash, brokerage positions may be liquidated at whatever the market price happens to be on the day of sale, and most states do not pay interest on funds while they hold them. The common escheatment window for checking and savings accounts is three to five years of inactivity depending on the state. For securities, many states don’t start the clock until mail has been returned undeliverable, which gives investors an extra layer of protection you should not count on.
Getting Money Back After It Has Been Escheated
If your funds are already with the state, you can file a claim to recover them. Start by searching the state’s unclaimed property database. MissingMoney.com, maintained by the National Association of Unclaimed Property Administrators, searches across most states in one place, and you can also search individual state treasury websites directly.
Filing a claim is usually free. Be cautious of third-party recovery services that charge a large percentage as a finder’s fee; most states cap what those firms can charge, and many claims are straightforward enough to handle yourself. Documentation varies, but expect to provide a government-issued ID, your Social Security number, and something tying you to the original account, such as an old bank statement or the address on file when the property was reported.