Since banks came into existence, individuals have trusted them with their money and valuables thanks to the facilities they boast of and the ability to keep individuals’ funds safe. If you aren’t an account holder yet, you may imagine opening an account and maintaining it as easy as ABC. But, that is not the case. There are several things you need to understand before opening an account, and some vary by bank. For instance, you are required to keep a minimum balance in your account at all times. If you do, you’ll get several benefits. But what happens if you don’t?
If you go below the minimum balance as specified by your bank, you may be charged with some fees, denied interest payments, closed, or lose other benefits attached to the account.
Opening an account can be easy. All you have to do is visit the bank you wish to open an account with and fulfill the typical requirements. Then, of course, you’ll be asked for the necessary details. In less than a day or two, provided there are no issues or complications, you’ll become an account holder. Easy-peasy, right? Of course, that is the easy part. Do you know what the hard part is? Maintaining the account. First off, you need to ensure that you don’t overdraw the account, as doing so could land you in a financial mess. What about minimum payment? Of course, you have to consider that too. In this article, I’ll explain to you what happens when you go below such balance.
What Happens if You Go Below the Minimum Balance?
After opening a bank account and depositing money in the account, what next? Spend the money in the account as you please? Or do you overdraft the account without considering the consequences?
Exhausting the money in your account is a bad decision, the same with over drafting it (for no serious reason). However, if you are an account holder or you are about to open an account, there are several things you need to understand. First, you need to realize that maintaining an account isn’t as easy as it seems. It involves more than checking your account balance, protecting it from scammers, or ensuring that it is well funded.
Maintaining your account involves understating the idea of a minimum balance and ensuring that you don’t go below the balance. Failure to do this may land you in an unpleasant situation. Before we proceed, let us consider what a minimum balance is.
What Is the Minimum Balance?
A minimum balance is the smallest amount of money you’ve had in your bank account during the entire month. Minimum balance fees can accumulate, so ensure you know what you are getting into beforehand, and try to find a bank with free checking and zero minimum balance requirement. Several different types of minimum balance requirements exist, including:
Minimum balance: When you are required to keep a minimum balance in your account, that means your account balance cannot go below the indicated amount at any time during your statement cycle, or you will have to pay a fee.
Minimum daily balance: Associated with checking accounts, a required minimum daily balance means that your balance can go below the required amount at any time during the day provided you meet the balance requirement at the closing of the business day.
Average monthly balance: Don’t mistake this term with average daily balance. To arrive at an average monthly balance, the bank tales down your account balance at the closing of each business day. Then, at the end of your statement cycle, the bank averages those balances by summing them up and dividing the figure by the number of days in your statement cycle.
Understanding a Minimum Balance:
When a person opens up an account with a bank, they are always required to keep a minimum amount of money in the account. This is the minimum balance and normally applies to checking deposits.
Depending on the financial institution, the reason for the minimum balance defers. Some banks may require a minimum balance to open the account, and others may need it for preferential treatment with included services. Banks measure and enforce the minimum balance in diverse ways.
Worthy to note that the minimum balance is always calculated as the actual dollar balance in the account but may be an average balance in the account over a specific period. This comes with a few perks, especially for those who lack a steady source of income. There can also be more than one minimum balance for a similar amount.
For instance, a certain balance may be needed to keep an account open, while another (a higher one) may be required to qualify for fee waivers or interest payments on deposits. If the account falls below the minimum balance, you could find yourself in an unpleasant situation. We’ll discuss more of this later in the article.
Why Do Banks Need a Minimum Balance?
Banks and other financial institutions impose minimum balances because, simply put; customers cost them money. Your bank or credit union has to pay overhead to operate branches, maintain accounts, deliver optimum customer service, etc. At the end of the day, a bank is still a business, and as you already know, a business must reel in money.
Having understood what a minimum balance is, you may be eager to know the outcome when you go below the specified minimum.
When you go below the MB, you automatically lose several benefits. These benefits range from fee waiver, interests, and eventually, your account might be closed. Every bank has its rules regarding a minimum balance, so ensure you visit your bank to find out their rules.
How Do Banks Find Out Someone Has Died?
Do Banks Require a Minimum Balance?
Before opening an account with a bank or a financial institution, it makes sense to do some research. Aside from finding out how good their customer service is, their interest rate (if you wish to borrow money), and other important detail, it is also essential you make findings of their minimum balance. But before doing so, you may want to ask if all banks require a minimum balance.
Banks (some) require a minimum balance, and they do so for several reasons. For example, some may require a minimum balance to open an account, while others may need it for preferential treatment with added services.
Worthy to note that not all banks require a minimum balance. So before opening an account, ensure you do your research.
