While minimum balance requirements are less ubiquitous today than they have been in the past, many reputable online banks and credit unions still require savings account holders to keep a certain amount of money in their account to either keep their account open, avoid fees, earn interest or a combination of these. The actual requirement can vary by institution – keep reading to learn more.
Key Insights
- Minimum balance requirements: Traditional banks typically require $300 to $5,000 to keep accounts active and fee-free, while online banks often have lower or no minimum requirements.
- Impacts of non-compliance: Not maintaining minimum balances can result in penalties like fees, lower interest rates, or account closure. Using automated deposits and keeping a buffer can mitigate these risks.
- Decline in requirements: The rise of online banks and fintech has led to a decrease in minimum balance requirements, making savings accounts more accessible and less burdensome financially.
What Is a Minimum Balance?
“A minimum balance requirement is the threshold a bank sets for your savings account. If you fall below it, you could face penalties, reduced interest rates or even account closure,” explains Jake Hill, CEO of DebtHammer.
Minimum balances can come in different forms, whether it is a minimum daily amount you need to keep in your account to avoid monthly maintenance fees or a minimum total balance to avoid your account being closed entirely. Sometimes, APYs on savings accounts are tied to balances as well, and account holders must have a certain amount to earn interest or higher rates.
Minimum balances are becoming less common, however.
“While it used to be a standard practice at most financial institutions, many online banks and fintech companies have disrupted this model by offering no-minimum/no-fee savings accounts,” Hill says.
Why Do Banks Have Minimum Balances for Savings Accounts?
Minimum balance requirements exist for a variety of reasons, one of which is that they help to ensure banks and credit unions have access to more funds they can use for investments and lending.
Hill adds that traditional banks use minimum balance requirements to ensure they can maintain the cost of brick-and-mortar operations.
“Online banks eliminate these costs, passing savings to customers through higher APYs and fewer fees,” Hill says.
Online vs. Traditional Savings Accounts
Online banks are often able to reduce minimum balance requirements and extraneous maintenance fees, because they don’t have to maintain physical branches and the additional cost associated with them, according to Hill.
Traditional banks often impose minimum balance requirements ($300 to $5,000), particularly for accounts with higher interest rates, Hill explains. “Online banks typically eliminate these requirements, instead attracting customers with high-yield savings accounts (HYSAs) that have zero fees. Business savings accounts tend to have higher balance requirements, as banks expect businesses to keep more cash on hand.”
Because of this, expectations for minimum balances vary based on the type of financial institution you choose.
What Is the Typical Minimum Balance for an Online Savings Account?
According to Hill, online savings accounts rarely require a minimum balance to keep your account open or avoid maintenance fees nowadays. When they do exist, they typically range from up to about $500, he said.
Minimum balances to open an account are also less common on online savings accounts, but could be about $100.
What Is the Typical Minimum Balance for a Traditional Savings Account?
With traditional savings accounts, you are more often required to keep a minimum balance in your account to keep it open and/or waive fees, Hill said, which typically range from $300 to $5,000.
Tips for Maintaining Minimum Balances
If you fail to meet any minimum balance requirements set by your bank or credit union, consequences may apply. These could include having to pay a monthly maintenance fee, earning a lower APY or even having your account closed. To ensure you maintain balance requirements, follow these tips:
Fund Your Account After Opening
Even on bank accounts that don’t have a minimum balance requirement to stay open in the long-term, you usually have to fund your account with even a few dollars in the first 30 to 180 days to avoid account closure. If there is no minimum balance required to open, the amount you put in your account doesn’t matter. If there is a minimum opening deposit, make sure you have those funds ready to go before applying for a new savings account.
Automate Deposits
“Set up automatic recurring transfers from your checking account to ensure you always stay above the threshold,” said Hill. Automating savings can also be a great tool for following a budget and ensuring you are setting aside money regularly.
Hill added that some banks waive requirements if you have a regular direct deposit into your account, so setting up paychecks or benefits to deposit into savings can also help you meet any stipulations.
Keep a Buffer in Your Account
Emergencies happen, and you may need to pull from your savings account when you aren’t expecting to. Keeping an additional buffer amount above any minimum balance requirements can help ensure you can still access the money you need without risking account closure or additional fees.
“If the minimum is $1,000, set a goal to keep at least $1,100 to $1,500 to account for unexpected withdrawals or emergencies,” Hill says.
Leverage Relationship Banking
Some banks waive minimums if you have multiple accounts (i.e. checking + savings + investments), Hill explains.
Many banks offer relationship programs to entice users to open multiple accounts, and meeting the requirements set forth in the program can unlock waived maintenance fees, higher interest rates and other benefits. Take a look at other offerings from your financial institution to see if any are a good fit for your financial goals.
“If your savings balance fluctuates often, a high-yield [certificate of deposit (CD)] or money market account can offer higher returns with less penalty risk,” Hill says.
Factor Minimum Balances Into Your Savings Account Decision
Minimum balances are much less common today than they have been in the past, especially on online bank accounts. When you are researching the best savings account for you, pay attention to any requirements associated – including minimum balances to waive maintenance fees, minimum deposits to open an account and balance requirements for advertised interest rates – to make sure you qualify.
