Inactivity Fee

DEFINITION of 'Inactivity Fee'

1. A sum charged to investors who haven't engaged in any buying or selling activities in their brokerage accounts for an amount of time specified by the brokerage.

2. A sum charged to credit card holders who haven't made any purchases in an amount of time specified by the credit card company.

BREAKING DOWN 'Inactivity Fee'

1. One way that brokerages make money is from commissions on trades. When a customer makes infrequent trades, the brokerage doesn't make money from that customer, and it may try to compensate for the lack of commissions by charging inactivity fees. Smaller, passive investors who make a small number of trades are the most disadvantaged by inactivity fees.

2. Similarly, credit card companies receive a small percentage of the sale each time a customer uses a credit card to make a purchase. When a customer stops using the credit card, the credit card company stops receiving this income, and it may charge an inactivity fee as a way to earn money from a customer who otherwise isn't generating any income for the company.

RELATED TERMS
  1. Fee Harvesting Card

    Credit cards targeted at consumers with poor credit scores that ...
  2. Dormancy Fee

    A penalty charged by a credit card issuer to a cardholder’s account ...
  3. Secured Credit Card

    A type of credit card that is backed by a savings account used ...
  4. Chargeback

    The charge a credit card merchant pays to a customer after the ...
  5. Credit Card

    A card issued by a financial company giving the holder an option ...
  6. Zero Balance Card

    A credit card on which a consumer does not owe any money because ...
Related Articles
  1. Credit & Loans

    Understanding Credit Cards

    Credit cards are a type of unsecured personal loan between the credit card issuer and the credit card holder.
  2. Professionals

    Small Business: Minimize Your Credit Card Fees

    Accepting credit cards is a must these days, but small business owners can take steps to minimize profit-eating credit card fees.
  3. Mutual Funds & ETFs

    Investing In Credit Card Companies

    This investment requires keeping an eye on consumer indexes and the overall health of the economy.
  4. Credit & Loans

    Credit Cards: Types Of Credit Cards

    By Brigitte YuilleCredit card products come in a wide assortment these days. Some credit card programs will ease their terms and conditions and offer perks for people with stellar credit, such ...
  5. Credit & Loans

    Credit Card Or Cash?

    Credit cards are convenient to use, but not always the best choice. Here are 5 times you shouldn't pay with a credit card – and 5 times you should.
  6. Budgeting

    Credit Card Fees

    Spot and avoid the money wasters that are slowly eating away at your wallet and bank account.
  7. Credit & Loans

    Terrible Credit Score? Try These Credit Cards

    When your credit is less than stellar you have fewer choices. But some are still better than others. Here's our read on which cards to get.
  8. Credit & Loans

    Credit, Debit And Charge: Sizing Up The Cards In Your Wallet

    Not all plastic is equal! Learn the difference between the three kinds, and how each can affect your finances.
  9. Credit & Loans

    Credit And Debt Management: Credit Cards

    by Cathy ParetoCredit cards offer a convenient way to purchase things without the hassle of carrying cash. Used wisely, they're a great way to defer payment on purchases for roughly a month. ...
  10. Credit & Loans

    Credit vs. Debit Cards: Which Is Better?

    Be strategic about the card you choose
RELATED FAQS
  1. Where are secured credit cards accepted?

    Repair a damaged credit history or establish one by opening a secured credit card account with a collateral deposit into ... Read Answer >>
  2. How can I avoid paying unnecessary credit card fees?

    Examine different strategies for reducing fees on credit cards. Learn about the Consumer Financial Protection Bureau and ... Read Answer >>
  3. What are the differences between debit cards and credit cards?

    Learn how the major difference between a debit card and a credit card is where the money comes from when a customer makes ... Read Answer >>
  4. Do prepaid Credit Cards have monthly fees?

    Choose a prepaid debit card with a fee structure that doesn't eat away at the existing balance by considering how you intend ... Read Answer >>
  5. Why do credit card companies calculate revenue splits in terms of basis points?

    Discover how revenue splitting works and how credit card companies are able to utilize basis points in revenue splits to ... Read Answer >>
  6. How do secured credit cards help me build my credit score?

    Find out how secured credit cards function and why they can be very useful for those looking to build or rebuild their credit ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center