How Activity Charge Works

An activity charge is a fee imposed by banks in response to particular account activities such as moving money between accounts, withdrawing money from an automated teller machine (ATM), or failing to meet the minimum deposit threshold for a checking account. The fee schedule associated with each of a bank's customer accounts would detail the precise activity charges made by the bank. Banks also waive activity fees entirely or for a limited time to draw customers.

Activity charges may be dependent on individual transactions, like fund transfers or withdrawals. They may also be caused by the account holder exceeding a fixed amount of monthly transactions, depending on the fee schedule in question. Customers, understandably, would want to stop paying activity charges if possible. Consumers who wish to prevent overdraft fees, for example, should enroll in overdraft insurance policies. Some banks may also cancel overdraft fees for minor transgressions, like $5 overdrafts.

In 2011, for example, new federal regulations in the US limited the number of activity charges that banks could levy on debit card transactions to $0.21 per transaction. In order to compensate for the missed fee revenues, some banks responded to the cap by imposing a new monthly fee for debit card users. Essentially, accounts with low monthly fees, on the other hand, tend to have high activity fees and vice versa. It's how banks set up revenue streams.

Real Life Example of Activity Charge

You have paid an activity charge one time or another to your bank, even unknowingly. Fees for using an ATM run by a bank other than your own are a prevalent form of activity charge. In these cases, the customer is often charged twice: once by their own bank and again by the bank that operates the ATM. You are often double-charged while traveling abroad, and the fee is normally much higher.

Other instances where you may pay an activity charge includes:

  • minimum balance costs, which are caused when your account's balance falls below a fixed threshold;
  • overdraft fees, which your bank charges when you (or other account holders) withdraw more funds than are contained in your account;
  • account closing fees, which you incurred when you close your account.

Many banking firms, especially credit unions and small community banks, provide checking and savings accounts with no monthly fees so that more customers can enjoy affordable banking.

A bank can exclude you from overdraft or minimum account requirement penalties if you deposit a certain sum above a set threshold. You can call these accounts "Gold" or "Silver" accounts. Fees levied for requesting paper copies of bank statements, fees for debit card withdrawals from savings accounts, fees for bounced or rejected checks, fees for sending or receiving wire transfers, fees for replacement cards, and fees for trading with foreign currencies are activity fees you may have to pay also.