A minimum balance is the least amount of money in your bank account for the entire month. Minimum balance fees can add up, so make sure you understand what you’re getting into ahead of time, and look for a bank that offers free checking with no minimum balance requirement. Click here to know about Clubbing of Income.
Types of Minimum Balance Requirement
There are several types of minimum balance requirements, including:
- Minimum balance: If you are required to keep a minimum balance in your account, it means that your account balance cannot fall below the specified amount at any time during your statement cycle, or you will be charged a fee
- Minimum daily balance: Which is associated with checking accounts, means that your balance can fall below the required amount at any time during the day as long as you meet the balance requirement at the end of the business day
- Average monthly balance: This is not to be confused with average daily balance. The bank records your account balance at the end of each business day to calculate an average monthly balance. The bank averages those balances at the end of your statement cycle by adding them all up and dividing the total by the number of days in your statement cycle.
Banks with No Minimum Balance Required
Some financial institutions still provide a free, no-minimum-balance checking account — that is, a free savings account with no minimum balance requirement. Because these minimum-free accounts can be difficult to find, it’s a good idea to know that there are other places where you can bank without having to worry about maintaining a required balance.
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An online bank, for example, is frequently classified as a bank with no minimum balance requirement. Because they don’t have physical branches, online banks have almost no overhead and can reduce or eliminate checking account minimum balance requirements.
Credit unions are nonprofit organisations that are owned and run by their members. They use their profits to reward their members with better rates, eliminate maintenance fees, and have no minimum deposit requirements.
How to Avoid Minimum Balance Requirements
Banks may require you to keep a minimum balance, but you may be able to get around that requirement. Here are a few alternatives to a minimum balance requirement:
- Online banking is available. One way to avoid a minimum balance requirement is to bank online; if you’re comfortable with technology and don’t mind banking online, this could be a good option for you. Signing up for direct deposit with your bank is another effective way to avoid minimum balance requirements
- Create a direct deposit account. If you have your paychecks deposited directly into your account, your bank is unlikely to impose a minimum balance requirement
- Make use of a credit union. Look into your local credit union to see if you can open a no-minimum-balance account
- Select a student account. If you qualify, open a student checking account; these accounts typically do not have a minimum balance requirement. Other benefits of student accounts include no monthly maintenance fee, free online and mobile banking, and more.
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