Account Activity

What Is Account Activity?

In finance and investments, account activity refers to the transactions made in a particular brokerage or bank account. These include cash withdrawals, bill payments, wire transfers, and other such transactions.

Account activity is sometimes used in reward programs to determine whether a customer qualifies for a particular award. In other cases, financial institutions will offer lower fees for clients that maintain a large amount of account activity.

Understanding Account Activity

In banking, common examples of account activity include transferring funds between accounts or sending money through electronic funds transfers (EFT). For business customers, a common source of account activity is managing accounts receivable and accounts payable, as well as managing the employee payroll. Clients who use investment brokerage services will also generate account activity by placing trades or borrowing on margin.

Financial institutions will often offer incentives for clients to be active users of their accounts. From the firm's perspective, high activity is beneficial because of the various fees associated with it. However, it can also be beneficial because clients who engage in multiple types of transactions at one institution are less likely to switch from that institution to a competitor. For this reason, firms will often provide rewards programs, reduced fees, and other benefits for clients who are active users of their accounts.

In order to track and reward clients' account activity, banks and other financial institutions need to maintain detailed and accurate records of client transactions. In the past, this was done through paper recordkeeping, but today it is primarily electronic in nature. For instance, data can be automatically tracked and accounted for by online banking and mobile banking platforms. Likewise, credit card companies and brokerage firms can process transactions nearly instantaneously, typically without the need for any paperwork at all.

Today, manual recordkeeping is generally reserved for infrequent and substantial activities such as new account setups, mortgage applications, or requests for refinancing. These transactions typically involve in-person meetings with firm staff in which documents can be reviewed and signed in person. In some cases, third-party professionals may also be involved, such as lawyers, accountants, and appraisers.

A periodic summary of account activity with a beginning date and an ending date appears on an account statement. Most account statements for financial accounts are compiled monthly, but some may be done quarterly.

Example of Account Activity

Laura is a client of XYZ Financial, a large national bank. In her daily life, she uses XYZ's online and smartphone platform for most of her banking needs. Currently, Laura has a checking account and a savings account at the bank as well as a credit card which is held at a rival financial institution, ABC Credit.

In order to attract and retain new customers, XYZ is offering a promotion whereby clients can enjoy lower fees if they maintain account activity of at least 10 transactions per month. Laura estimates that between her two accounts she already generates five transactions per month through activities such as bill payments and cash withdrawals. 

In order to bring her total up to the required level, she decides to close her credit card at ABC Credit and instead apply for one with XYZ Financial. She reasons that once her credit card transactions are counted toward her total, her combined account activity with XYZ will be sufficient to earn the reduced fees offered by the promotion.

Special Considerations

An activity charge is a fee charged by financial institutions in response to specific account transactions or activities. Common activity charges can be applied to withdrawing money from an ATM (other than the institution's own), not meeting minimum account requirements, overdrawing an account, transferring funds between accounts, or — especially in the case of savings accounts — exceeding the allowed number of transactions.

The details of an account's activity charges should be laid out in its fee schedule and agreed upon when a customer signs the forms that officially open the account.