How To Kick-Start Account Activity And Cleanup Dormant Accounts

A monthly fee at CommonWealth One FCU has helped the credit union encourage higher checking account balances and close inactive accounts.


Inactive checking accounts are harmful to a credit union in a couple of ways. First, these accounts skew financial performance data and negatively affect ratios. Second, they cost time, money, and resources to maintain.

But inactive checking accounts also represent opportunity.

Such is the thinking at CommonWealth One Federal Credit Union ($318.5M, Alexandria, VA). The Virginia cooperative views inactive account holders as unengaged members who just need a nudge to jump-start the relationship. That nudge comes in the form of a monthly $5 inactivity fee, which the credit union implemented in the summer of 2014.


CommonWealth One FCU
Data as of 12.31.15

HQ: Alexandria, VA
ASSETS: $318.5M
MEMBERS: 32,719
12-MO LOAN GROWTH: -0.01%
ROA: 0.42%

The Benefit

An inactivity fee is not a new strategy for CommonWealth One; however, it hoped increasing the frequency from quarterly to monthly would more efficiently and effectively engage checking account holders.

“The fee is a motivational tool to get members to start using their accounts,” says the credit union’s CFO Isabel Gomez. “These are accounts that are stagnant. We want people who aren’t using their account to move on.”

Parking money at CommonWealth One doesn’t benefit the credit union or its members, says Gomez, who’d rather see the credit union deploy deposit money in other ways.

And despite the fact the credit union is charging an inactivity fee, according to Gomez, that fee does not generate substantial income for the institution.

“It’s going to suffer from diminishing returns because we will eventually run out of accounts to fee,” she says.

The Definition

Not every account with a low balance or infrequent transactions is truly inactive. Instead, the credit union defines “inactive” as accounts that fall below a certain threshold of transactions per month and with account owners who hold no other open products or services with the credit union.

If you have a savings or money market account or a loan that is active, then we aren't going to bother the checking account. Even if it's just sitting there.

Isabel Gomez, CFO, CommonWealth One FCU

“If you have a savings or money market account or a loan that is active, then we aren’t going to bother the checking account,” Gomez says. “Even if it’s just sitting there.”

The credit union also exempts older members, accounts with large balances, and those with IRAs.

When it comes time to identify inactive accounts, the credit union sorts its data set according to these parameters.

In the month the credit union launched the monthly fee, it flagged 558 inactive accounts. In March 2016, it flagged 294. That’s less than 1% of the credit union’s 32,719-strong membership base.

The Reaction

The credit union implemented the monthly fee in the summer of 2014, but members did not react for several months. According to Gomez, a few account holders closed their accounts in the few months following, but it wasn’t until December 2014 that the credit union noted a significant response.

In that month alone, the credit union closed 500 checking accounts.

“It took members until the end of the year to notice they were being charged a monthly fee,” Gomez says.

Since then, the credit union has posted improvements in a number of its checking metrics, most notably in its average share balance.

CommonWealth One’s fourth quarter 2015 average regular share balance of $2,445, although less than the average for credit union with $250 million to $500 million in assets, was 10% higher than at year-end 2014, according to quarterly performance data from Callahan & Associates.



Source: Callahan & Associates.

In addition, regular share growth at CommonWealth One is trending up. At fourth quarter 2014, regular shares had increased just 0.08% year-over-year??. One year later, that growth rate was 6.36%.



Source: Callahan & Associates.

In the nearly two years since the credit union implemented the monthly fee, inactive accounts have decreased approximately 47%. Gomez attributes a part of that improvement to the fact the credit union is not afraid to re-evaluate parameters.

“If we see a trend where a lot of accounts are closing or that accounts we fee are not closing, we’ll fix the parameters to be less restrictive or more accommodating,” she says.

The decrease in inactive accounts, Gomez believes, is more largely the result of an overall increase in active members, especially considering total shares continue to rise.

“We always want our members to be engaged,” Gomez says, “I’ve always viewed these inactivity fees as a way to tell members, ‘We’re here. You’re not using us, so why don’t you start?’”




April 11, 2016


  • Very interesting topic, thanks for a great article!
    Oak Tree Business Systems, Inc.
  • This is a great article!
  • What does the credit union do with the fees it takes from the members' accounts? Does it go to income as fee revenue? Why not just develop a definition of an inactive account and send a check to the account owners with a note saying "we noticed you've stopped using your account and thought you'd like your money back. If you still want to use your account let us know and we'll show you how to get even more from your credit union." Maybe I'm cynical, but it looks to me like the CU is just taking their members' money ...
  • Fees are far less risky and, yes, generate revenue. Consider the cost to the credit union if they were to generate 500, even 1000 checks and mail them--labor, paper, ink, postage. That can add up fast! Not only would they be voluntarily clearing deposit assets that could very well be kept (we've had dormant members chose to reactivate and stay!), but there is no guarantee those checks are ever cashed--will they actually reach the member? Folks that have dormant accounts don't often keep the CU up-to-date on information, so they're likely to get a lot of returned mail too. You might suggest that a CU should be able to handle such a situation, but consider that CUs both large and very small struggle with this problem, and the CUs with small assets aren't equipped to financially handle the strain of the solution you're suggesting.