Definition of minimum Balance
Minimum Balance Definition concerning bank accounts refers to the least dollar amount that a customer should hold in an account to get some service benefits like receiving interest and keeping the account open/ active.
However, margin accounts are termed as minimum deposit amount before margin trading is allowed. Moreover, after buying a stock on margin, the maintenance margin requirement for the account is called as minimum balance definition.
Types Of Minimum Balance
Several types of requirements exist to maintain a minimum balance fee definition that can help the customers to avoid unexpected fees. Knowledge of the following facilitates to take an educated step and which bank to link with:
Minimum daily balance
Linked with checking accounts, this explains that the type of minimum balance fee definition of the customer’s account can drop from the required value at any time, but needs to be met at the end of the business day. So, If the client fails, he has to pay the monthly fee.
The positive note of this type of minimum balance definition is that it is easy to understand. However, the downside can be that it is never unforgiving i.e there is no way to cover. Moreover, it might happen by accident like subscription services or signing for automatic payments to the credit cards etc which requires a close eye.
This category explains that the account balance should not drop below the stated amount at any point of time during the statement cycle otherwise the fees can be charged.
Average monthly balance
This method explains the customer’s account balance is recorded at end of each business day. Then after the statement cycle, the bank adds them up to average the balances and divide the figure by several days which must be greater than the minimum balance definition specified.
This must be noted that the bank counts holidays as well. Therefore, a customer can drop below the advertised amount for a short run while avoiding the monthly fees. As a result, this method is comparatively better than the minimum daily balance where the daily check was required.
Minimum combined balance
The requirement here counts the balance of every account that the customer has in a financial institution.
For example, Mr X has a checking account with the amount of $700, savings with $1000 as a balance and $1200 for a money market account. After combining these balances, the total becomes $2900. Therefore, the minimum balance fee definition requirement is to be met whose low balance definition combined balance is less than $2900.
As a result, it is beneficial for those who do all banking in one place. So, The balance of other accounts helps to keep the new account fees-free. They can further be maintained either on a daily or average monthly basis which needs to be tracked by the customer.
Features / Keypoints of minimum Balance
- The minimum balance definition in short is the minimum amount to maintain the account.
- For margin accounts, it refers to the minimum deposit required before trading and the maintenance margin required after trading has begun.
- Margin accounts need the lesser of $2000 or 100% of the security’s purchase price as minimum balance( required by FINRA).
- The minimum balance definition can be implied by closing the account, denying interest payments or charging fees if not maintained. In short, banks can make the money off to cover the cost of operating the customer’s account.
- This must be noted that not all banks require the minimum balances to be maintained.
- The policy of minimum balance fee definition helps the banks to bring deposits, which in turn allows them to lend money or maintain a few regulatory financial ratios.
- Also, they can often be avoided by utilizing online services, opening student accounts, setting up direct deposits etc.
Brief of Minimum Balance Definition
Depending on the type of bank, the reasons vary to maintain a minimum balance. Few banks ask them just to open an account while others may need it to provide preferential treatment with services.
The minimum balance definition is often calculated as an actual dollar balance but can be an average balance over a certain period. So, These method suits individuals that don’t have a steady income. Also, there may be greater than one minimum balance for the same account.
For example, A specified amount may be required to open an account but a higher balance to attain the qualifying limit for interest payments on deposits or fee waivers. Banks provide different tiers to the clients like ‘silver’, ‘gold’ or ‘platinum’ with different minimum balance definition and facilitate various other services.
Ways to avoid Minimum Balance Requirements
There are different ways where a customer can circumvent the stipulation and avoid the minimum balance requirement which is as follows:
- Set up direct deposit: If the paychecks are deposited directly into the customer’s account, then the corresponding bank won’t require the client to maintain a minimum balance definition.
- Online banking: Another way can be for the people who are comfortable with technology and don’t mind going banking on the internet. Therefore, online banking can be a good option. This method uses as to sidestep the minimum balance definition by signing up for direct deposit with the bank.
- Opt for a student account: If a person qualifies for a student checking account, they typically do not have minimum requirements. Also, they offer other perks as well like no monthly maintenance fees, mobile banking or free online etc.
- Credit union: Exploring the local credit union by looking at a customer’s option can open an account with no low balance definition amount.
- Finding a bank with no minimum deposit: Moreover, there are banks available that do not require such balances maintains which will be discussed further.
Banks free from Minimum Balance
There are various bank accounts where minimum balance definition or monthly average balance does not apply. Although there are different names for different banks, some common bank accounts that do not demand minimum balance definition requirements are as follows:
- Salary Package Accounts
- Basic Savings Bank Deposit Accounts
- Pensioners Savings Bank Accounts
- No Frills Accounts
- Pradhan Mantri Jan Dhan Yojana Accounts
- Kids/Minor Savings Account
- Small Accounts
Also, there are bank accounts that do not need any maintenance of minimum balance definition in the client’s account. So, Some of the accounts are as follows:
- Kotak 811 by Kotak Mahindra Bank
- IDFC Bank Zero Balance Account
- FedBook Selfie Account by Federal Bank
- digiSavings Account by DBS
- ICICI Bank Edge Savings Account
- Aasaan Account by Standard Chartered Bank
Minimum Balance Definition vs Opening Deposit
Both the terms sound similar and are related, yet they are different. For opening a bank account the minimum opening deposit requires a customer to deposit at least that amount of money. If the client does not have the deposit, they cannot open an account at all.
Many banks have a low balance definition amount set for minimum opening deposits so that customers can open an account easily. Also, other banks or online banks have lower minimum balance definition needs as compared to minimum deposits. In that case, the customer can withdraw some of the money after opening an account without worrying about fees.
The policy for minimum opening deposit applies for the first deposit only while opening. The client can deposit even a small amount with no minimums after the account is open.
Minimum Balance for Savings Account
There are two types of a savings account – regular and zero balance. So, People having savings account have to maintain a minimum balance for savings account which varies from bank to bank like rate of interest.
There is a difference between paying a penalty on non-maintenance and maintaining a minimum balance for savings account. Also, The bank charges a penalty for non-maintenance on the monthly average balance and not the minimum balance definition. Therefore required monthly average balance saves charges from the bank.
Penalty for non-maintenance of Minimum Balance Definition
The zero balance in minimum balance for savings account however offer the customers to open an account with no money, there are few examples of banks with the following types of charges as well as the interest rate:
|Bank Name||Minimum Balance Required(INR)||Savings Account Interest rate||Features|
|Axis Bank||0/10000/250000/100000||3.50-4.85%||Auto FD feature for balance above 10000 Zero balance savings account option available instant account number complimentary debit card etc.|
|Bank of Baroda||0/5/1000||2.75-3.00%||Zero balance facilityInterest etc. quarterly|
|HDFC Bank||2500/5000/10000/25000||3.00-3.50%||Offers through online shopping and discounts|
Customized banking service
No annual maintenance charges for an initial year
|ICICI Bank||0/1000/2000/2500/5000/10000||3.00-3.50%||Choose own account number|
Advantages attached with ICICI EPF account etc
|Kotak Bank||0/2000/3000/5000/10000/20000||Up to 4.00%||Opening account via Kotak 811 plan |
Instant account open with aadhaar card
Digital bank accountFree online transfers (RTGS)
|Punjab National Bank||500/1000/2000/5000||3.50-3.75%||Interest calculated on daily product base 20 free personalized multi-city cheque Deposits insured by DICGC etc|
|SBI||0/1000/2000/2500||2.70%||Safe deposit lockers as per availability|
Special salary accounts Personal accident and health insurance etc