Minimum balance

What It Means

A minimum balance is the amount a bank or credit unionCredit unionA not-for-profit financial cooperative owned by its members, offering accounts and loans to people within the field of membership its charter sets. See more asks you to keep in a checkingChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more or savings accountSavings accountA bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions. See more. It can be the amount needed to open the account, to avoid a monthly maintenance feeMonthly maintenance feeA charge a bank or credit union takes each month for keeping a checking, savings or money market account open, often waived if you meet set conditions. See more, or to earn the interest rateInterest rateThe yearly percentage a lender charges for borrowing money, not counting fees; the APR adds certain fees to show a fuller cost. See more the bank advertises. Federal Truth in Savings rules (Regulation DD) require the bank to list these amounts in the account disclosure and, apart from the opening deposit, to say how it measures your balance.

How It Sounds at Home

• "They charged me twelve bucks for dipping under fifteen hundred."
• "You have to keep a minimum balance or they hit you with a fee."
• "If I set up direct deposit, they waive it."

The Breakdown

A short example. Luis keeps about $2,000 in checking at a bank that charges $12 a month unless the balance stays at $1,500 or more. In March, a car repair pulls the account down to $900 for three days before his paycheck lands.

Where it goes wrong. Luis checked his balance on payday, saw more than $1,500, and assumed he was fine. His bank looks at the balance every day of the calendar month, so three low days were enough to trigger the fee. The account also waives the fee with direct depositDirect depositA payment, such as a paycheck or government benefit, sent electronically straight into your bank or credit union account instead of as a paper check. See more, but his paycheck goes to a different bank.

What to watch for.

• Which minimum applies: the one to open the account, to avoid the fee, or to earn the stated rate.
• How and over what period the bank measures the balance, which the disclosure has to say.
• Other ways to skip the fee, such as direct deposit, listed in the same disclosure or fee schedule.
• Large one-time payments that leave the account for a few days before money comes back in.

Good to Know

Regulation DD (12 CFR 1030.4) requires the account disclosure to list any minimum balance and, except for the opening deposit, how that balance is determined; the CFPB's official commentary gives the daily balance over a calendar month as one example for fees. According to the CFPB's Ask CFPB page on monthly maintenance fees, many banks and credit unions skip the fee if you keep a set minimum balance or have your pay or benefitsBenefits packageEverything an employer offers on top of wages, such as health insurance, paid leave and a retirement plan, which can be worth thousands of dollars a year. See more deposited directly. The OCC's BankWise guide notes you receive this disclosure when you open the account, so ask the bank for a copy if yours is lost.

Related Terms and Categories

• Monthly maintenance fee

  A charge a bank or credit union takes each month for keeping a checking, savings or money market account open, often waived if you meet set conditions.

• Checking account

  A bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit.

• Savings account

  A bank or credit union account for money you're setting aside for later, which earns interest and is insured up to federal limits at insured institutions.

• Direct deposit

  A payment, such as a paycheck or government benefit, sent electronically straight into your bank or credit union account instead of as a paper check.

• Account balance

  The money in a bank account once posted deposits and payments are counted, also called the ledger balance; pending card purchases aren't subtracted yet.

• APY

  A yearly rate showing the total interest a deposit account pays, counting how often interest compounds, as defined by federal Truth in Savings rules.

Household money and budgeting