A minimum balance is the amount a bank requires you to keep in your account to avoid penalties. If you fall below the required amount, you may be charged a monthly maintenance fee, receive a lower interest rate, or even close your account. And minimum balance requirements can range from as little as $100 to $1,000 and higher.
One way to avoid this frustrating situation is to move your money to an online savings account. Unlike traditional banks, it is unusual for online banks to have high minimum balance requirements, if any.
Fortunately, most online banks do not have minimum balance requirements for their savings accounts. That’s because they have lower overhead costs than banks with physical branches. As a result, they can pass on a variety of benefits to customers, including higher interest rates, reduced fees and waived balance requirements.
Still, you don’t want to make assumptions. Before opening an online savings account or other type of bank account, check to see if there is a minimum balance required to avoid penalties or earn the best interest available.
Read more: The 10 best online banks today
With a traditional savings account, you are more likely to need a minimum balance than with an online account. However, it is difficult to say what the minimum will be as every account is different.
For example, the Bank of America Advantage Savings account requires a minimum daily balance of $500 to waive the $8 monthly maintenance fee. However, there are several other ways to get the fees waived, such as linking your savings account to an eligible BofA checking account.
By comparison, US Bank’s Bank Smartly Savings account has a $5 monthly maintenance fee, which is waived if you have another eligible US bank account. But if you want to earn more than 0.05% interest, you’ll need to maintain at least $5,000 in combined deposits in the accounts.
Here’s an overview of some of the best online savings accounts and their minimum balance requirements:
If your savings account balance falls below the minimum, you could face a wide range of penalties, including:
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Account closure
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Minimum balance fees or monthly maintenance fees
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No interest income for the month
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Switch to a lower rate level
If your account balance becomes negative, you will face an additional set of penalties. For example, the bank may charge an overdraft fee or an insufficient balance fee. If this becomes a habit, the bank can even report the negative balance to ChexSystems. As a result, it may be difficult for you to open a new savings account in the coming years.
Additionally, if you don’t pay back the negative balance or bank fees, the bank may deduct the bill from collections, lowering your credit score.
With online banks, you can’t just go to a branch and make a deposit. Instead, you’ll need to fund and manage your account online or through an app, which means you’ll probably want to set up direct deposits and monitor your transactions more regularly.
Here’s what you can do to make sure your online account doesn’t fall below the minimum balance requirement (if there is one):
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Make sure part of your paycheck always goes into savings by setting up a recurring direct deposit.
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Do not use your savings account for your daily expenses. Instead, use your checking account for that purpose.
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Keep a “cushion” in your savings, or a small amount that you never plan to use.
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Check your account balance regularly to ensure there are no unexpected transactions.
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Set low balance alerts on the account.
What is the difference between minimum balance and minimum deposit?
The minimum balance in a bank account refers to the balance you must maintain to avoid penalties. The minimum deposit is the amount you must deposit to open the account. In some cases, a savings account may have a minimum opening deposit requirement, but no minimum balance.
Like online bank accounts, most digital savings accounts have no minimum balance requirement.
Minimum balance fees are fees charged when your bank account balance falls below a certain dollar amount. These costs may vary per financial institution.
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