Why Holding Dormant Bank Accounts Is Costing You Money

When you think about your financial health, the first thing that comes to mind is usually your primary checking and savings accounts. But what about those older accounts you’ve moved away from? Whether it’s a leftover savings account from childhood or a checking account opened for a long-forgotten purpose, many of us are sitting on multiple bank accounts we no longer actively use. The question worth asking: should you keep them, or is it time to close them for good?

The Silent Fee Trap

One of the most insidious ways banks eat into your unused accounts is through minimum balance requirements. Picture this scenario: you opened an account years ago when you needed it, but now you’ve consolidated your finances elsewhere. That old account still exists in your bank’s system, and it still has rules. If your balance falls below the required threshold—even by a few dollars—the bank starts charging you monthly maintenance fees or other charges.

This happened to me firsthand. By not actively monitoring an older savings account, I watched $50 vanish in fees when my balance dipped below the minimum requirement. What made it worse? The account was linked to my main checking account, so I thought it was serving a purpose through overdraft protection. But that protection wasn’t worth the fee I paid.

The mathematics are simple: if you have $5,000 sitting in an unused account with a $1,500 minimum balance requirement and a $10 monthly maintenance fee, you’re losing $120 annually simply for the privilege of keeping the account open. Over five years, that’s $600 gone—money that could have been working for you elsewhere.

Inactivity Fees and Gradual Depletion

Banks face government regulations about abandoned accounts, which creates an incentive problem for financial institutions. When you stop using an account entirely, the bank has less control over it, so they begin imposing inactivity fees. These charges gradually erode your balance over time.

Let’s say you have $2,000 in that dormant account and the bank charges a $5 monthly inactivity fee. Within 400 months—roughly 33 years—that account balance would theoretically hit zero, assuming no other transactions occur. But in practice, most people don’t wait that long. Once your balance reaches zero or nearly zero, the bank simply closes the account and moves on. You’ve lost the money to fees without ever consciously deciding to spend it.

The cruel irony? That money was yours. It belonged to you, and you never authorized the bank to slowly chip away at it piece by piece.

Reclaim Your Capital

Here’s where the real opportunity lies: any money sitting in unused accounts is money that could be put to better use. Whether you’re building an emergency fund, paying down debt, or investing for the future, every dollar counts—especially in an economic environment where costs keep rising.

If you suspect you have money languishing in a forgotten account, transferring it to your primary account should be your next move. That’s not just about avoiding fees; it’s about taking control of your finances. You could redirect that capital toward your financial goals rather than letting it disappear into banking fees.

The Important Caveat

Before you rush to close an account, understand one critical detail: if that account is overdrawn, you must settle the debt before closing it. Closing an account that’s in good standing won’t harm your credit score, since banks don’t report individual account activity to credit bureaus. However, an overdrawn account is different. If you leave it unpaid, the bank can send the debt to collections, which absolutely will appear on your credit report and damage your creditworthiness.

Additionally, banks may report negative account history to ChexSystems, a banking information reporting agency. Accumulate too many negative marks with ChexSystems, and you could find yourself unable to open new bank accounts elsewhere. The consequence isn’t immediate, but it compounds over time.

Taking Action

The strategy is straightforward: audit all your bank accounts, identify which ones you no longer use, transfer any remaining balances to accounts you actively manage, and formally close the dormant ones. It’s a simple housekeeping task that can save you hundreds of dollars annually.

As for where to move that money, FDIC insured savings accounts offer security and, depending on the institution, increasingly competitive rates. Online savings accounts in particular have become increasingly attractive for those looking to earn meaningful returns while keeping their funds safe and accessible.

The bottom line: unused bank accounts are financial liabilities masquerading as safety nets. Take control, consolidate your accounts, and watch your money work for you instead of against you.