Account Closure & Dormancy Fees

What are closure and dormancy fees?

Two fees sit at the end of an account's life, and they catch people in opposite ways.

An early closure fee is charged for closing an account shortly after opening it, within a window the account agreement sets. It is often meant to discourage opening an account only to collect a sign-up bonus.

A dormancy fee is charged for the opposite behavior: leaving an account alone. After a period with no activity, set in the account agreement, the bank can classify the account as inactive or dormant and start charging a fee.

How much does it cost?

The median early closure fee is $20.00, across 1,665 institutions, typically ranging from $10.00 to $25.00. It is charged once.

The median dormant account fee is $5.00. It can recur, so over time it can cost more than a one-time closure fee.

A third fee often appears alongside these: account research, median $15.00, charged when you ask the bank to look into an old account or produce historical records. If you are reconstructing what happened to a dormant account, this is what the reconstruction costs.

The early closure fee applies only within a window after opening, set in the account agreement. If you have been putting off leaving a bank because you think closing is expensive, check that window against the date you opened the account.

Dormancy is the opposite: the risk grows the longer you leave it. Old accounts from a previous job, a college town, or a closed joint relationship are the usual candidates.

What happens to forgotten money

If an account stays inactive long enough, the bank does not keep the balance. State unclaimed property law requires it to be handed to the state, a process called escheatment. The dormancy period before that happens is set by each state, often three to five years.

The money is not lost at that point. Every state runs a free unclaimed property search, and you can claim the funds from the state, though it takes paperwork and time.

Search every state where you have lived or worked. A balance usually goes to the state of the owner's last known address on the account, which may not be where you live now.

How to avoid or reduce this fee

1. 1Before closing a new account, check the early closure window in the account agreement.
2. 2Set up a small recurring transaction on any account you intend to keep but not use. Ask your bank what counts as activity; an automatic transfer usually does.
3. 3Log in periodically. At some institutions this counts as activity, though a transaction is more reliable.
4. 4Close accounts you have stopped using, properly. An account left at zero is still an account that can be charged.
5. 5Empty it before you close it, and get written confirmation of the closure. An account you believe is closed can keep charging fees if the request was not completed.
6. 6Confirm any pending transactions have cleared first. A payment landing after closure can reopen the account or push it negative.

Questions to ask your bank

• How long after opening does the early closure fee apply?
• How long without activity before you charge an inactivity or dormancy fee, and how much is it?
• What counts as activity: a deposit, a withdrawal, a login, or a transfer?
• Will you notify me before you start charging it?
• How do I close an account so that you confirm it in writing?
• Can I close the account online or by mail, and does that cost anything?

What regulators say

Unclaimed property is state law rather than federal. Each state sets its own dormancy period, its own notice requirements, and and its own rules about whether a bank may charge fees against a dormant balance at all. Some states restrict this. Because it varies, the rules that apply to you are your state's, not a national standard.

Use your state's official unclaimed property search, which is free. A service offering to find your money for a percentage is charging for a search you can run yourself.

State law generally requires the bank to try to contact you before it turns the balance over to the state, which is one more reason to keep your address current.

Compare your own bank

Then do the more valuable thing: list every account you hold and identify the ones you have not touched in a year. Those are the accounts a dormancy fee can drain.