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Understanding Minimum Balance Requirements

Many banks and credit unions require you to maintain a certain amount of cash in your bank account, whether it’s a savings, checking, or money market account. This is known as the minimum balance requirement. Keeping this balance can help you avoid fees and enjoy certain benefits.

What Is a Minimum Balance?

A minimum balance is the amount your bank or credit union requires you to keep in your account at all times. Meeting this requirement can help you avoid fees and potentially earn a higher annual percentage yield (APY). If your balance falls below this threshold, you might incur fees or lose some earning potential.

Types of Minimum Balance Requirements

Minimum balance requirements can vary depending on the financial institution and the type of account. Here are some common types:

Minimum Opening Deposit

This is the amount of money you’ll need to deposit to activate a bank account.

Minimum Daily Balance

Your bank or credit union may require you to keep a certain amount of money in your account each day to avoid fees or earn interest.

Average Minimum Balance

This requirement may be easier to meet than a daily balance. Your bank calculates the amount of money in your account at the end of each day and divides it by the number of days in the statement period. If your average balance exceeds the requirement, you typically avoid fees.

Minimum Combined Balance

Your bank will average the amount of money you keep across several accounts with that institution to calculate your balance.

Do All Accounts Have Minimum Balance Requirements?

No, not all accounts have minimum balance requirements. Some financial institutions won’t set these requirements on any of their accounts. Others may charge a monthly maintenance fee on some or all accounts but offer several ways to get the fee waived, such as maintaining a daily or monthly account balance.

What Happens if You Go Below the Minimum Balance?

If you fail to maintain the required minimum balance, you may face consequences such as a monthly maintenance fee or losing the APY you were earning. These consequences usually apply only for the months your balance dips below the threshold.

How to Avoid Minimum Balance Requirements

Here are some strategies to avoid minimum balance requirements:

Learn Your Bank’s Requirements

Check your financial institution’s website or the agreement you signed when you opened the account to understand the minimum balance requirements.

Research Accounts Without Minimum Balance Requirements

Some institutions don’t have balance requirements at all, while others may apply them only to certain types of accounts. Research multiple institutions to find the best options.

Set Up Direct Deposit

Many financial institutions will waive the minimum balance requirement and monthly fee if you set up direct deposit for your paychecks.

Establish Recurring Transfers

Setting up regular automatic transfers between your accounts at the same financial institution can help you avoid monthly maintenance fees.

Take Advantage of Relationship Discounts

Some banks eliminate account fees if you have more than one account with them, such as a checking and savings account.

Monitor Your Balance

Keep an eye on your balance to ensure it doesn’t dip below the minimum requirement. Ask your bank or credit union if you can set up low-balance alerts.

The Bottom Line

Tracking your balance and staying above the minimum balance threshold can be time-consuming. Falling below the limit can get expensive if you’re routinely paying monthly maintenance fees. If you’re not sure whether you can meet minimum balance requirements, consider opening an account that doesn’t have them.

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