What Are Average Monthly Balance Charges and How Can You Avoid Them?

Sponsored Post 23 May 2025

Investor Interest

You glance at your phone and see a notification from your bank. It’s a reminder about your account balance, with a suggestion to transfer funds and avoid possible charges. It might not seem pressing, but these small alerts are all part of managing your finances wisely. Curious about what these charges are all about and how they can impact your budgeting? Let’s dive into Average Monthly Balance, its charges and ways to manage your finances better.

What is Average Monthly Balance and its charges?

The Average Monthly Balance (AMB) is the minimum balance you need to keep in your savings account each month. It’s calculated by taking the sum of the daily end-of-day balances and then dividing it by the number of days in the month. If your balance falls below this requirement, your bank may charge a fee.

How is Average Monthly Balance calculated?

The basic calculation to find AMB is to add up the closing balance for each day of the month and then divide it by the number of days.

Let’s say you had 5,000 in your account for 15 days and 10,000 for the next 15 days in a 30-day month. The calculation would be:

( 5,000 x 15) + ( 10,000 x 15) / 30 = 7,500

Is keeping Average Monthly Balance beneficial for you?

The following are some of the benefits of maintaining AMB:

Avoids penalty charges when you consistently maintain the required AMB.
Encourages financial discipline by motivating you to keep track of your spending and save more.
Increases earning potential through higher interest rates on savings when you maintain a healthy balance.
Provides access to exclusive banking services, such as pre-approved loans, better credit rates, and premium account features.

Tips to avoid the charges of Average Monthly Balance

Here are some strategies that will help you maintain balances in your account:

1. Set up direct deposits:

Many banks will waive AMB charges if you have regular direct deposits, such as your salary, going into your account. This ensures you meet the bank’s requirements without needing to monitor your balance constantly.

2. Automate transfers:

You can automate monthly transfers from another account, ensuring you always meet the minimum balance. This can be particularly useful if you have multiple accounts or get paid irregularly.

3. Consolidate accounts:

If you have several accounts with minimum balance requirements, you can consider consolidating them. It will reduce the need to spread your funds across multiple accounts. This helps you maintain the required balance in one place.

4. Use a zero-balance account:

If you’re finding it difficult to maintain the AMB, look into accounts that don’t have a minimum balance requirement. For instance, you can open a bank account online with zero balance.

5. Keep a check on your bank balance regularly:

Setting up alerts for low balances can help you avoid any surprises. Regular checks make it easier to manage your spending and adjust as needed to avoid dipping below the AMB.

6. Set up balance alerts:

Many banks allow you to enable alerts that notify you when your balance is getting close to the AMB limit. It can help you act quickly and transfer funds if necessary, reducing the chance of being charged.

7. Choose the right account:

AMB requirements can vary depending on the type of account. For instance, salary accounts or premium savings accounts may have more flexible balance requirements. So, select an account that suits your situation.

Endnote

The charges for not maintaining the Average Monthly Balance (AMB) vary across banks and depend on the type of account you hold. For instance, major banks charge either a percentage of the shortfall or a fixed amount. So, it’s essential to know your bank’s specific AMB requirements, as these fees can add up over time if you don’t stay above the required balance.

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