What Is an Activity Charge?

An activity charge is a fee charged by banks in response to specific account activities, such as transferring funds between accounts, withdrawing funds using an automated teller machine (ATM), or when a checking account does not meet its minimum deposit requirement.

The exact activity charges made by a bank will be outlined in the fee schedule associated with each of its bank accounts. Oftentimes to attract customers, banks will waive activity charges altogether or for a certain period of time.

Key Takeaways

  • An activity charge is a fee charged by banks in response to specific transactions related to banking activity.
  • Common activity charges can be applied to withdrawing money from an ATM, not meeting minimum account requirements, and transferring funds between accounts.
  • The details of an account's activity charges will be laid out in its fee schedule and agreed upon when a customer signs account opening forms.
  • Because consumers naturally wish to minimize the fees they pay, banks will often compete with each other by offering discounted activity charges.
  • The advent of electronic banking has made it harder to justify some activity charges when customers can complete services themselves at home on their computers.

Understanding an Activity Charge

Depending on the fee schedule in question, activity charges may be based on individual transactions, such as fund transfers or withdrawals, or they may be triggered by the account holder exceeding a predetermined number of monthly transactions.

Understandably, customers will often seek to avoid paying activity charges as much as possible. For instance, consumers who want to avoid overdraft fees can sign up for overdraft protection policies; some banks will even waive overdraft fees for small transgressions, such as overdrafts of $5 or less.

In 2011, new federal regulations placed a limit of $0.21 per transaction on the activity charges permissible by banks on debit card transactions. Some banks responded to this cap by adding a new monthly fee for debit card users, in order to compensate for the lost fee revenues.

Another way that customers can reduce their activity charges is by specifically seeking out accounts with less onerous fee schedules.

Many financial institutions, especially small community banks and credit unions, offer checking and savings accounts that do not incur monthly maintenance fees.

Generally, however, accounts with low monthly fees will have relatively high activity charges, and vice versa. It is how banks set up ways to make money.

Overall, reduced activity charges are one of the main ways that banks seek to compete for new customers. This is particularly true in recent years, as federal regulations now limit the amount of money that banks can charge for certain transactions, such as making payments through debit cards.

Whereas some banks responded to these limitations by increasing their fee schedules in alternate areas, others have responded by keeping their fee schedules low and marketing themselves as a low-fee alternative.

With the advent of online banking, it has become harder to justify activity charges on some transactions. All it takes is a few clicks from a customer on their computer without the involvement of a bank representative or any additional paperwork to get the service completed; hardly enough to charge fees on.

Types of Activity Charges

One especially common type of activity charge is the fees levied for using an ATM operated by a bank other than your own. In these situations, the customer is often double-charged; once from their own bank and another from the bank operating the ATM. In addition, when traveling internationally, customers are double charged but the fee is usually significantly higher.

Aside from ATM-related activity charges, other examples include minimum balance charges, which are triggered when the balance of a given account falls below a predefined threshold; overdraft fees, which are incurred when account holders withdraw more funds than were held in their account; and account closure fees.

Oftentimes if a customer deposits a certain amount above a set threshold they are exempt from overdraft or minimum account requirement fees. These are often labeled as "Gold" or "Silver" accounts.

Additional examples include fees charged for making debit card transactions from savings accounts, fees for requesting paper copies of bank statements, fees for bounced or returned checks, fees for replacement cards, fees for sending or receiving wire transfers, and fees for dealing in foreign currencies.