Last updated on October 9th, 2023 at 01:00 pm
If you are having a bank Account at some point of time you might have felt that banks are debiting unnecessary charges to your account. The important service charges that customers are unaware is the Minimum Balance Charges.
Banks are service sector thus it is unavoidable for bank to create a charges for the service provided by them. All the charges are debited with a proper reasoning and well disclosed including minimum balance charges.
Thus banks have a valid reason for charging you for the service rendered by them. But it does not mean you cannot avoid such charges. With right method and being watchful about the use of the account you can avoid such charges.
Here in this article we will explain what is a bank service charges, the logic behind the minimum balance requirement and more importantly how to avoid these charges.
So read the blog completely for having a clear knowledge.
What is Service Charges in Bank?
Bank is a financial institution that accepts deposit from public and lends them to the needy sectors with the higher interest rate. It is the basic business structure of the bank and primary source of income.
But to meet with the technological development and consumers requirement the banks are providing additional services to the customers. Though it gives more freedom to the customers, the bank does not gain any income for the investment made.
Thus banks are levying charges to the customers to meet the expenses made for such additional services. But there are ways you can avoid certain charges levied by bank.
Most often the problem arises for the people when they are charged to the service they never availed. Thus knowing various charges and the reasoning behind it will help you prevent them.
Here in this post we will discuss specifically about Minimum Balance Charges.
Minimum Balance Charges
As earlier explained the deposits are the brick and mortar for the banking sector. The greater the bank deposit, the banks have a higher liberty of giving more loans without worry.
Thus banks will expect customers to have more deposit with them. But banks will expect a customer to maintain a minimum balance to meet at least the expenses incurred for managing the account.
If customer does not have this minimum balance the banks could not generate any income with the operation of particular account let alone losses money by account maintenance. Thus to compensate the expenses banks levies charges for the particular account.
How to Avoid Minimum Balance Charges
- The simple way to avoid the minimum balance is to maintain the minimum balance at all the time. Because the Balance requirement in Indian banks are really marginal, thus maintaining minimum balance all the time is a simple solution the issue.
- The minimum balance requirement in banks are based on the Monthly or Quarterly Average Balance of the account. Thus If you are a business person or having a regular cash flow in the account there is no need to worry. You can make a bulk deposit for a shorter period for compensating for the remaining period. This could be further elaborated with the following example
- For Example if you are having a bank account with the minimum Average Quarterly Balance of Rs. 1000.
- To avoid minimum balance charges you can maintain Rs. 1000 for the whole quarter (90 days) or you can keep a balance of Rs. 90,000 for one full day.
- In the both the cases the average balance kept by you will be same Rs. 1000 per day. Thus the bank will not charge you for the period.
- You can open Zero Balance Account for avoiding the minimum balance charges. But the zero balance accounts are having restriction in transaction.
- Government and RBI made it mandatory for every bank to provide a basic savings bank account with no balance requirement. The scheme is called Pradhan mantri Jan-Dhan Yojana Account (PMJDY).
Conclusion
The Minimum Balance is a basic requirement for every savings account be it Private or Public Sector Bank. Thus understanding it will help you more in saving your hard earned money.
The charges are disclosed by banks on their official website under Banking Service Charges and you can enquire about it on the branch.
The simple way to avoid the charge by being educated and cautious, the tips provided in this blog post are summarizing the same.
We hope this post is helpful for you and resolved your queries. If you have any further questions feel free to comment we will give answer to the same.