A savings account in a bank is essential for many financial transactions. While having a savings account in a bank is convenient, maintaining its monthly average balance (MAB) could be a tedious task. The savings account minimum balance requirement for different banks ranges from Rs 2,000 to Rs 10,000, depending on whether you live in a metro, urban or rural area. Moreover, if you fail to maintain the required average balance every month, you might be charged a penalty of up to Rs 500.
You can use the following tips to save yourself from paying penalties for not being able to adhere to savings account minimum balance requirements.
Tips to avoid penalties for not maintaining minimum balance in savings accounts
Keep a higher amount for a few days: While you might think that the minimum average balance should be maintained every day, that’s actually not the case. The MAB is calculated by adding up all the closing balances of the month and dividing the sum by the number of days in that month. Therefore, if you need to maintain a balance of Rs 10,000, you can lock-in Rs 50,000 for just 6 days and maintain the MAB for a month of 30 days.
Close your savings account: If you’re unable to maintain the required balance and want to save yourself from penalties, closing your savings account could be a good option. You can always apply for a fresh account once you are ready to adhere to the MAB regulations.
Also, while closing the savings account, you should remember that not maintaining a minimum balance shouldn’t leave you with a negative balance. However, if it happens, contact the bank’s staff as RBI guidelines says that savings accounts can’t have negative balance due to penal charges for not maintaining minimum balance.
Switch to a zero balance savings account: After closing your existing savings account, you can consider opening a zero balance savings account. You can do so by initiating a fresh application in your existing bank if they offer such services. However, if the bank doesn’t have a zero balance savings account facility, then you can try considering other banks.
A zero balance savings account is a good alternative to regular savings accounts as penalties aren’t levied due to MAB requirements. However, the benefits of such accounts are also limited. Also, it’s important to note that these zero balance savings accounts impose higher transaction fees at times. Moreover, the credit facilities available are limited.