Keep your account in good shape by understanding your minimum daily balance.
When it comes to bank accounts, especially savings or interest-bearing accounts, you might have heard the term minimum daily balance. But what does it really mean? Simply put, your minimum daily balance is the lowest amount of money in your account at the end of each day during a statement period.
Banks use this number to determine things like service fees, eligibility for interest, or access to special account perks. If your balance dips below the required minimum on any day, you might face a fee or miss out on earning interest that month.
How It Works
Imagine your bank requires a minimum daily balance of $500. Each day, the bank checks how much money you have at the end of the day.
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If your balance never drops below $500 during the month, you’re in the clear.
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If one day your balance falls to $450, you might be charged a service fee.
This method is different from looking at your average balance over the month, which some accounts use instead. Minimum daily balance focuses on the lowest point your account reaches each day.
Why It Matters
Understanding the minimum daily balance is helpful for a few reasons:
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Avoiding Fees – Keeping your balance above the minimum prevents unexpected service charges.
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Earning Interest – Many interest-bearing accounts require a minimum daily balance to earn interest. Falling below it could mean losing out on extra earnings.
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Accessing Perks – Some banks offer free checks, ATM fee reimbursements, or other benefits if you maintain the minimum balance.
Tips to Stay Above the Minimum
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Track your balance daily – Use mobile banking alerts to avoid surprises.
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Plan withdrawals carefully – Large or frequent withdrawals could drop your balance too low.
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Consider automatic transfers – Move money from another account if you see your balance nearing the minimum.
Example
Let’s say you have a savings account with a $1,000 minimum daily balance. One week, you withdraw $700 to pay bills, leaving $300. At the end of that day, your balance is below the required minimum. The bank could charge a fee, and that month, your account might not earn interest. By understanding the minimum daily balance, you can plan ahead to avoid these issues.
Keeping your account healthy is easier when you know the rules. Paying attention to your minimum daily balance helps you avoid fees, earn interest, and get the most out of your bank account.
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