Why do banks charge dormant account fees?

[Stephen Tashiro]

Charging a "dormant account" fee seems like a banking practice from the 1950's, but local banks still do it. If an account has a balance large enough to allow free checking, why do banks charge for dormant accounts? I'm sure the answer is that it is profitable for them to do so, but what are the economics of this?

Banks get exhorbitant fees (relative to their expenses) when they sell you books of checks for your account. So perhaps the loss in revenue from not selling printed checks makes them want to discourage dormant accounts.

Another theory is that banks can make money on the accounts of people who die. If an estate is not settled quickly, the bank accounts of the deceased could be dormant.

Another theory is that banks want people to put their money in certificates of deposit with the bank instead of leaving it in an account.

[Brian Elfert]

The economics of charging a fee for this make no sense. A dormant account costs the bank basically nothing as the account holder isn't using any services. They should be making money loaning out this money.

[Brian Kent]

Are they spending money on monthly statements?

[Stephen Tashiro]

Are they spending money on monthly statements?

For my bank, all my accounts are included in one monthly statement. So I'd guess that they are. But they don't have to spend money to pay someone to scan the images of the checks for a dormant account.

Does any forum member use a bank that doesn't charge dormant account fees?

[Van Huskey]

Because they can... that and the fact it does cost money to send statements etc.

[Rick Potter]

Man, I sure love my Credit Union. I am dealing with a major bank while handling my late Aunts estate. They even charged me a fee to deposit money (electronically).

Rick Potter

[Jim Mackell]

Dormant accounts require special monitoring as they are often the target of theft. They also require special reporting to State regulators as the various States desperately want to have the funds transferred to them for their use. The last thing any bank wants is a dormant account. They are a giant pain in the posterior.

Yes, banks are in general evil and money gouging, but at least in the case of dormant accounts the fees are justified.

If your credit union isn't charging fees for dormant acccounts, then you and all the other shareholders are paying the freight.

Jim (bank operations for 20 years)

[Brian Elfert]

These days statements are often emailed or on the web so no more postage and printing costs. The bank our Scout troop uses converted to 100% electronic statements a few years ago and won't send paper at all. Do banks really have humans looking at dormant accounts or is it all computerized now?

[Jim Mackell]

Do banks really have humans looking at dormant accounts or is it all computerized now?

The computer will prepare a list of transactions that occurred on dormant accounts. Those transactions need to be reviewed to see if they are legit or not. Each bank has some threshold level (like every nth transaction) where they will ask the account owner to confirm the activity was correct. Dormant or inactive accounts are a favorite target of embezzlers both from within the banking industry and from outside.

[Stephen Tashiro]

It's interesting to hear from someone who knows the inside of banking.


Dormant accounts require special monitoring as they are often the target of theft.

Am I correct that this is because the holders of dormant accounts often fail to monitor them?



They also require special reporting to State regulators as the various States desperately want to have the funds transferred to them for their use.


I don't understand the part about wanting the funds transferred. Are you saying the States are eagerly watching dormant accounts so they can be seized as "unclaimed property"?




The last thing any bank wants is a dormant account. They are a giant pain in the posterior.



If I make one deposit or withdrawal every 30 days to keep an account non-dormant, does it cease to be a pain in the posterior for the bank? Or is the guideline of 1 transaction every 30 days a statutory rule - or pehaps an arbitrary rule that's made in the hopes that the account holder will make more transactions than that.

[Jim Mackell]

It's interesting to hear from someone who knows the inside of banking.


1. Am I correct that this is because the holders of dormant accounts often fail to monitor them?



2. I don't understand the part about wanting the funds transferred. Are you saying the States are eagerly watching dormant accounts so they can be seized as "unclaimed property"?





3. If I make one deposit or withdrawal every 30 days to keep an account non-dormant, does it cease to be a pain in the posterior for the bank? Or is the guideline of 1 transaction every 30 days a statutory rule - or pehaps an arbitrary rule that's made in the hopes that the account holder will make more transactions than that.

1. Yes, dormant accounts are not being actively watched or monitored by their owners. So the bank has to exercise more than normal amounts of caution in allowing withdrawals. The actions of an embezzler might go unnoticed for years otherwise.

2. Yes, in MOST states, dormant accounts are considered abandoned property and once turned over to the State, they go into the General Fund. If and when a true owner steps forward, the State is responsible for paying them. Check http://www.sec.gov/answers/escheat.htm here for good definition of ESCHEATMENT.

3. Definitions of dormancy vary by State and by type of account. What's true in my State would be different in yours.

[Jason Roehl]

Keep in mind, too, that interest rates have been very, very low for a very long time now, and there is a relatively low level of lending taking place right now (where banks used to make money...). So now banks make their money from fees--I'm sure it won't be long until you have to insert a dollar into a slot to get into your local branch.