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The average minimum monthly balance is the average amount you need to maintain in your savings or current account in a calendar month. Unlike the minimum daily balance amount, the minimum monthly balance is calculated based on the average of your daily closing balance amounts throughout the month. At the end of each month, the bank calculates whether you have met the required average minimum monthly balance. Failure to do so may result in you paying a charge or penalty to the bank. There are some benefits of maintaining the average minimum monthly balance, which we discuss here.
Maintaining a minimum average balance in a bank account or savings bank account every month can potentially discourage you from making unnecessary withdrawals or purchases and help foster an attitude toward saving. Doing so helps you develop a habit of financial discipline that can prove to be helpful for you.
Indirect effect of Credit Health
Maintaining an average minimum monthly balance also has a positive impact on your credit health. Your credit score depends on your ability to repay the loan. When you have sufficient funds in your bank account, you are better equipped to repay your loan on time.
Benefit of higher interest and special offers
The higher the balance in the savings account, the higher the returns in the form of interest. Under the bank’s savings account, you can avail of special offers on debit and credit cards, lifestyle benefits, reward points as well as preferential pricing on certain products like personal loans.
Depends on the category of banks and area
The condition of the average minimum monthly balance depends on the category of different banks and areas. The condition of private banks is more stringent than that of government banks. To maintain the minimum monthly balance in the account, you will have to follow your budget in a disciplined manner.
