Because of the added security banks and other financial institutions like credit unions offer to consumers, many people opt to put the extra money they have into a savings account. Every financial institution has different regulations on what they require to open and maintain these savings accounts. This includes stipulations on the minimum balance.
There is no standard minimum balance for savings accounts at financial institutions as of 2011. Instead, institutions may decide at their discretion whether to require consumers to hold a minimum balance. Subsequently, the minimum amount required will vary depending on the institution.
Typical Minimum Balances (Individual Accounts)
Many banks offer savings accounts for which there is no minimum balance. The banks that do have minimum balance requirements usually keep the requirement fairly low -- around $100 or less -- because they understand consumers can go elsewhere if they can't meet minimum balance requirements. Some banks, however, may require minimum balances as high as $1,000 or more. These banks keep their minimum higher because they have researched the average minimum balance their customers typically hold and know the requirement usually won't be problematic.
Typical Minimum Balances (Business Savings Accounts)
Although many businesses keep their funds in general, interest-bearing checking accounts, some companies opt to open separate savings accounts to accommodate items such as employee retirement funds that are intended for specific purposes. For these types of savings accounts, the minimum balance usually is much higher than the minimum balance for individuals. It isn't unusual for an institution to require a business to keep a minimum balance of $1,000 to $10,000.
Why Banks Require a Minimum
Financial institutions require you to keep a minimum balance in your savings account because it ensures them they'll have a reserve of funds to meet the expenses of maintaining the accounts at the bank. Banks that don't require minimum balances generally have alternate funding sources on which they can rely aside from the minimum balances. Banks that have a high minimum balance may not have these reserves and alternatives.
Failure to Keep a Minimum Balance
In many cases, if you don't keep the minimum balance as required by your financial institution in your savings account, the institution charges you a penalty fee. However, in some cases, these fees can be hefty. Some institutions are much stricter. They may close your account if you don't remedy your minimum balance deficiency within a specified period. Often you will authorize the institution to take this action when you fill out the paperwork related to opening the account, so this shouldn't take you by surprise if it happens.
Benefits of Minimum Balances
Minimum balance requirements have two primary benefits. First, they ensure that you always have a minimum reserve of funds available to you as long as you have the account. Secondly, they sometimes entitle you to certain perks, such as waived fees for other services. Keeping a minimum balance thus is a simple way to save additional money for the life of the account.
- Go Banking Rates: Do Banks Require a Minimum Balance for Savings Accounts?
- Union Bank: Small Business -- Frequently Asked Questions
- Union Center National Bank: Business Savings
- Vida Americana: How To Open A Bank Account
- Capital One. "Credit Card Minimum Payments Explained." Accessed May 11, 2020.
- Experian. "How Is Your Credit Card Minimum Payment Calculated?" Accessed May 11, 2020.
- Citibank. "Card Agreement Guide." Page 6. Accessed May 11, 2020.
- Equifax. "What Is a Charge-Off?" Accessed May 11, 2020.
- American Express. "Understanding the Differences Between Charge and Credit Cards." Accessed May 11, 2020.
- Consumer Financial Protection Bureau. "Why Did My Credit Card Issuer Increase My Late Payment Fee?" Accessed May 11, 2020.
Wanda Thibodeaux is a freelance writer and editor based in Eagan, Minn. She has been published in both print and Web publications and has written on everything from fly fishing to parenting. She currently works through her business website, Takingdictation.com, which functions globally and welcomes new clients.