What's the Typical Minimum Balance for Online Savings Accounts?

The main point is that the majority of the online savings accounts have $0 as their minimum balance requirement.

What Does "Minimum Balance" Actually Mean?

A minimum balance requirement is the minimum amount that must always be kept in a savings account. It varies from one bank to another and may be required for:

• Maintaining the account

• Avoidance of monthly service charges

• Access to the stated annual percentage yield (APY)

• Eligibility for premium account features

However, not all minimum balances are treated equally. While some institutions monitor your daily minimum balance, others check your average monthly minimum balance, which gives you some breathing space.

According to Jake Hill, CEO of DebtHammer

"Failure to maintain the minimum will result in penalties, lower interest rates, or closing the account."

Fortunately, the banking industry has evolved significantly in the past few years, and many consumers now enjoy minimum balance-free saving accounts.

Online vs. Traditional Banks: A Tale of Two Standards

And that is where it gets interesting. The choice you make when selecting a type of bank will play a crucial role in determining what you must maintain.

Online Savings Accounts

Online banks are branchless banks, so their operational cost is relatively low. This cost reduction is reflected through increased APY, no fees, and very low balance requirements.

Most online savings accounts require a minimum balance of zero dollars. Your bank won’t charge you monthly fees for maintaining a low balance and won’t reduce the interest rates in case you have a low balance in one month.

Most online banks request an initial deposit ranging between one dollar to a hundred dollars. However, this is not always the case, as more online banks nowadays waive this requirement. In other words, once you have opened an account, you are free to maintain any balance.

"The online banks tend to omit these conditions and, instead, try to attract new customers through their high interest savings accounts which require no minimum balances or fees."

 Jake Hill, CEO of DebtHammer

Traditional Savings Accounts

Traditional banks work differently. They require premises, personnel, and technology to provide their services. The expenses involved can be quite costly, and imposing minimum balances is the way banks cover them.

In an ordinary brick-and-mortar bank, you may expect the required daily minimum balance of about $300 to get rid of monthly fees. If you use premium savings accounts, then this requirement might reach $3,500, $5,000, or even $25,000.

What is more, if your balance falls under the threshold, almost all traditional banks will impose a monthly maintenance fee of $5 to $15. This does not seem much, but still costs you an additional $60 to $180 a year.

Why Do Banks Set Minimum Balance Requirements?

However, one thing is certain – the banks do not come up with this decision out of nowhere.

With funds kept on deposit on the customer's account, a bank receives an opportunity to make investments and lend money to other clients. More capital leads to better profit margins.

In the case of regular banks, another important benefit associated with the imposition of minimum deposit levels includes covering the costs connected with running physical branches.

Every office requires rent, utilities, and salaries, and somebody has to pay for that.

Pro Tip:

In case the maintenance fees imposed by a traditional bank bother you a lot, it would be reasonable to find out if there is a relationship banking scheme implemented by the same financial institution. For instance, most banks would waive all sorts of fees for maintaining accounts if you choose to open a checking, savings, and even an investment account.

It is online banking services that have changed this game completely. No branch means that the bank does not really need people to keep substantial balances on deposit accounts.

How to Avoid Falling Below the Minimum Balance

Either way, whether banking through the internet or at brick-and-mortar bank branches, managing to keep clear of falling below a mandatory limit entails a little bit of foresight. And these methods are really useful.

Fund Your Account Right Away

It's particularly helpful when you're applying for new savings accounts. Banks without any monthly fees for maintaining minimum balances still close any idle account after some period of time, so it should be avoided.

There's usually anywhere between 30 and 90 days from the time the bank identifies an inactive account until it decides to shut it down, yet it's best not to put your money to test. If there's a mandatory opening amount needed, have enough cash available when filling out an application.

Set Up Automatic Transfers

A surefire method for making sure your balance stays above your limits is automating the whole process. Set up regular transactions from your checking account monthly, even if they're minimal; they will slowly build up your savings balance.

As Hill suggests, "Automate your savings by setting up automatic recurring transfers from your checking account and ensuring you always stay above the threshold." You can even try getting a waiver on minimum balance requirements from a few banks if you arrange direct deposits into the savings account.

Keep a Small Buffer Above the Minimum

Life is unpredictable, and expenses like medical payments, car repairs, and other things will take money out of your account faster than you expect. If your minimum is $1,000, avoid keeping an exact minimum balance in your account.

"Keep $1,100 to $1,500 in the account as a cushion in case something comes up that causes you to withdraw additional money out of the account," according to Hill.

That extra $100 to $500 gives you flexibility without risking dipping below your minimum.

It sounds obvious, but having an extra bit of cash in your savings account above the minimum is not only intelligent — it's the easiest change that can turn reactive people into proactive individuals when it comes to their finances.

Consider a High-Yield Alternative

When the amount you have in savings is often changing, a basic savings account may not suit your needs. High-yield savings accounts (HYSAs), money market accounts, and certificates of deposits are some examples of savings options where you may find higher interest rates and alternative balance arrangements.

Pro Tip:

While comparing interest rates, remember to review any potential tiered balance requirements. Certain HYSAs won't give you the advertised APY unless your balance goes above a particular amount.

Frequently Asked Questions

What is the absolute minimum I need to keep in an online savings account to avoid fees?

The answer for most online savings accounts would be $0. Most online banks do not require any minimum balance and monthly fees. While there could still be an initial minimum amount of $1 to $100 required upon opening the savings account, there would no longer be any minimum balance requirement after the first deposit.

What happens if my balance drops too low at a traditional bank?

The common penalty applied is a monthly maintenance fee ranging from $5-$15 depending on the bank. Other than that, in some cases, there could be a reduced annual percentage yield or APY while the balance is below the threshold. Closure of the account would also be a possibility, although it is quite uncommon.

How much do I need at a major bank like Chase or Bank of America?

As far as conventional banks go, having a minimum daily balance of $300 at any big bank is sufficient to avoid paying any monthly fees in a savings account. For premium/tiered accounts, this amount could be as high as $5,000 or even more.

Can I open a savings account with no money at all?

Indeed, many online savings accounts do accept a $0 minimum opening deposit. However, it is a good idea to put money into the account straight away to keep the account open and functional. Inactivity periods exist and banks can close any account if it has been inactive for 30-90 days. A small deposit will help prevent this from happening.

Choosing the Right Account for Your Balance Habits

What account is best suited for your needs depends entirely on how you utilize your savings. Unless you are certain you will be putting enough money in the account regularly to maintain a minimum balance, it is more practical to choose a free online savings account without restrictions.

If you prefer physical banking experience, check out the conditions of a regular bank where you may be an existing customer and find what suits your needs.

Things to consider when choosing an account:

• Minimum amount needed to open the account

• Minimum amount needed to be maintained to avoid fees

• Required amount to earn the advertised APY

• Inactivity policy regarding unfunded/dormant accounts

Final Words

The general minimum required balance for online savings accounts is zero, and that represents a huge leap from where banking stood only a decade ago. FinTech firms and online banks have worked to drive the industry into becoming less restrictive, offering higher interest rates and more flexibility.

While traditional banks generally insist on having a daily balance of about $300 for regular accounts and much more for premium options, it does not mean that you should necessarily end up paying fees. In this case, using simple tricks, such as automatic transfer and setting up direct deposits, would do the trick.

It pays to be well-informed before deciding which account to open. Spending just a few minutes researching what the savings product offers will make a big difference and prevent any unexpected fees.