What is a Minimum Balance Requirement for Checking & Savings?

When you open a new bank account, there’s a lot of paperwork, requirements, and fine print to consider.

You have to pay attention to the interest rate, fees, ways that you can fund your account, and more.

One thing that many bank accounts -- usually checking and savings accounts -- have is a minimum balance requirement.

It is a key term that may affect you -- pay a monthly fee if you don't meet this requirement.

What's worse:

Banks apply this requirement in different ways.

Learn everything that you need to know about minimum balance requirements, and how you can use them to avoid monthly account fees.

What is a Minimum Balance Requirement?

A minimum balance requirement is the minimum amount of money that you have to keep in your bank account, usually in order to waive the account's monthly fee.

For example, if a bank account has a $100 minimum balance requirement, you want to make sure that you don’t let your balance fall to $99.99 or less.

Maintaining the minimum balance will let you avoid the fee. Falling below it means you’ll pay a fee for the month.

Most often, these fees are charged by brick and mortar banks for various deposit accounts.

One of the benefits of online banks is their lower fees, so they often have no minimum balance requirements at all. Some investment accounts also have a minimum balance requirement.

Knowing the minimum balance requirement of an account that you’re thinking about opening is very important.

The last thing that you want to do:

Open a new bank account, just to find that you will have to pay a fee every month.

Different Ways that Banks Require a Minimum Balance

Not all minimum balance requirements are the same.

There are multiple ways that banks can require a minimum balance and knowing the difference can help you avoid unexpected fees.

The three most common ways to deal with minimum balance requirements are:

  • Minimum daily balance
  • Average minimum balance
  • Minimum combined balance

Each method of dealing with minimum balance requirements has its pros and cons.

Knowing the benefits and drawbacks of each, and which your bank uses, can help you make educated decisions about which bank accounts to open.

Minimum daily balance

A minimum daily balance is the minimum amount of money that you have to have in your account at the end of each day.

This may be the easiest of the minimum balance requirements to understand and handle.

If you ever have less than this amount in your account at the end of a day, you’ll have failed to meet the requirement and will have to pay the monthly fee.

If you do fall below the minimum balance requirement during the day, you may be able to avoid the fee by making a deposit on the same day. So long as the deposit posts before the day ends, you’ll be in the clear.

The upside of minimum daily balances is that they’re very easy to understand.

Never fall below the balance, and you won’t pay a fee.

The downside is that they are unforgiving.

Even if your balance falls below the requirement for one day, there’s no way to recover.

This is easy to let happen by accident, especially if you have signed up for automatic payments to your credit cards or other subscription services. That means you’ll want to keep a close eye on your account balance at all times.

Average minimum balance

The average minimum balance is the combined end-of-day balances divided by the amount of days in the statement cycle.

It allows you to drop below the advertised minimum for a short time while still avoiding the monthly fee.

At the end of each day, the bank records the balance left in your bank account.

When your statement closes, the bank adds together your ending balances from each day, then divides that number by the number of days in the statement.

If the resulting number, the average balance you had at the end of each day, is greater than the minimum balance requirement, you won’t pay a fee.

This is easier to meet than a minimum daily balance requirement. With this method, you’ll be safe if you never let a day end with less than the minimum balance requirement, just like a minimum daily balance.

However, you can recover from letting your balance fall below the minimum for a day or two.

Just deposit some extra cash to make your average balance meet the minimum.

Minimum combined balances

The minimum combined balance requirement considers more than just the balance you keep in the bank account with the requirement.

It may also count the balances of every account that you have at the financial institution.

Consider this example. You have a checking account with $1,000 in it, a savings account with a balance of $1,500, and $2,600 in a money market account. Combine these balances, and you have a total of $5,100. You’ll meet the requirement for any account whose minimum combined balance requirement is less than $5,100.

So:

If you do all of your banking in one place, combined minimum balances are a great deal.

If you want to open a new savings account for a specific purpose, such as saving for a vacation, you won’t have to worry about putting a lot of money in right away.

The balances of your other accounts can help you keep the new account fee-free.

Minimum combined balances can either be daily, or average balance requirements, so pay attention to how your bank tracks things.

Minimum Balance vs. Minimum Opening Deposit

When you’re opening a new bank account, you’ll run into a lot of fine print related to fees and minimums.

Alongside the minimum balance requirement, you’ll often see the term minimum opening deposit.

While both of these terms sound similar, and they are related, they’re very different things and it’s important to know the difference.

A minimum opening deposit is exactly what it sounds like.

When you open the bank account, you’ll be required to deposit at least that amount of money. If you cannot deposit that much when you open the account, the bank will not let you open the account at all.

The minimum opening deposit can be more or less than the minimum balance requirement. Many banks have lower minimum opening deposits to help make it easy for customers to open a new account.

Again:

If you don’t deposit the minimum balance requirement, you’ll wind up pay fees very quickly.

Other banks, particularly online banks, will have lower minimum balance requirements than minimum deposits.

In that case, you can open the account with the minimum amount and quickly withdraw some of the money without worrying about fees.

It’s good to know that the minimum opening deposit only applies to the first deposit that you make when you open the account. You can deposit any amount, even just a penny, once the account is open, with no minimums.

How to Avoid Minimum Balance Requirements

You may be wondering whether it’s possible to avoid minimum deposit requirements.

Unfortunately:

There isn’t really a way around them, other than depositing enough to meet the requirement.

Other fee waiver requirements

One thing to look for is whether the account offers another way to avoid monthly fees.

If you can get the fees waived another way, then you don’t have to worry about keeping enough money in the account.

Many banks offer alternatives, such as:

  • signing up for direct deposit
  • using online bill pay
  • making a certain number of debit card transactions

If meeting one of those requirements is easier for you, then the minimum balance requirement is less important to think about.

The downside is that these alternatives often require proactive action, such as making bill payments from the account rather than through another method. Minimum balance requirements are more passive.

The other alternative is to find a completely different account with a lower minimum balance requirement that you can meet.

For the best option, look for a bank account that has no minimum balance and no monthly fee.

Many online banks have low or no minimum balance requirements and don’t charge monthly fees.

They also tend to offer great interest rates and a host of other benefits, so they should be among the first banks that you consider.

Conclusion

Minimum balance requirements are a common aspect of bank accounts.

If you can meet the minimum balance requirement, you can avoid fees, but falling below it means you might pay the bank more than you expect to.

Knowing your bank account’s minimum balance requirement, and how your bank handles them, can help you avoid surprise fees and keep more of your money working for you.

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