26 September, 2023
When you open a Savings Account with any bank, you ought to come across the term, Average Monthly Balance (AMB). The bank will urge you to maintain this balance in your Savings Account at all times. If you fail to maintain the Average Monthly Balance in your account, the bank can levy non-maintenance charges. In this article, you can get information on what AMB is and how maintaining AMB will benefit you.
What is Average Monthly Balance?
Also, sometimes known as the minimum balance, the Average Monthly Balance is the minimum amount of money that you need to maintain in your Savings Account to avoid non-maintenance charges.
To calculate your AMB, the bank takes the sum of the closing balances for all days in a month and divides it by the number of days in the month. If the average is less than the AMB, the bank will notify you in 2 months that you maintain the minimum balance to avoid the non-maintenance charges. This charge will be directly deducted from your Savings Account funds.
The AMB can differ across account variants and areas. For instance, AMB for an HDFC Bank Regular Savings Account is ₹10,000 for metro and urban areas and ₹5,000 for semi urban areas; whereas AMB for an HDFC Bank DigiSave Youth Account, is ₹5,000 and ₹2,500, respectively. HDFC Bank offers Savings Max Account that comes with a ₹25,000 AMB.
Illustration
Let’s understand how AMB works with the following example. Let’s assume the bank has set an AMB of ₹10,000/-.
Days | Number of days | Closing balance | Number of days x closing balance |
1st to 5th | 5 | ₹30,000 | ₹1,50,000 |
6th to 8th | 3 | ₹15,000 | ₹45,000 |
9th to 14th | 6 | ₹5,000 | ₹30,000 |
15th to 30th | 16 | ₹10,000 | ₹1,60,000 |
The formula to calculate AMB = (Sum of closing balances for the month)/ (Number of days in the month)
Per this formula, the AMB for the above example would be:
AMB = (₹1,50,000 + ₹45,000 + ₹30,000 + ₹1,60,000)/30 = ₹3,85,000/30 = ₹12,833.33
Since this is greater than the expected AMB of ₹10,000, the bank will not levy penalties.
As an HDFC Bank Savings Account holder, you can check the charges here.
Benefits of maintaining an Average Monthly Balance
Maintaining an Average Monthly Balance in your Savings Account comes with various benefits:
Encourages financial discipline
Having to maintain a minimum average balance every month can potentially discourage you from making unnecessary withdrawals or purchases and help foster an outlook for saving.
Indirect impact of credit health
Your credit score is dependent on your debt repayment capacity. You are better equipped to repay your debt on time when you have sufficient funds in your bank account.
Potential to earn higher interest
The higher the balance in your account, the better are your chances of earning greater interest. You can check the Savings Account interest rates offered by HDFC Bank here.
Access to exclusive offers
By opting for HDFC Bank’s Savings Account, you can avail yourself of exclusive offers on Debit and Credit Cards, lifestyle benefits, reward points as well as preferential pricing on certain products such as Personal Loans, amongst others.
Ways to maintain Average Monthly Balance in your account
Here are ways you can ensure maintenance of the Average Monthly Balance:
Select the right account variant
You need to select the right Savings Account variant so that you can maintain the balance in a hassle-free manner. For instance, if you are above 60 years old, you can opt for an HDFC Bank Senior Citizen Account which has a relatively lower AMB of ₹5,000/-. If you’re an individual aged between 18 years and 25 years, you can opt for a DigiSave Youth Account which has a lower AMB of ₹5,000/- in metro and urban areas and ₹2,500/- in semi-urban and rural areas.
Opt for sweep-in facility
HDFC Bank offers sweep-in and sweep-out facilities with Fixed Deposits (FDs) on select Savings Account variants. With this facility, your FD will be automatically dissolved to meet the shortfall in the Savings Account.
Set standing instructions for transfers.
You can set standing instructions for scheduled transfer of funds to your Savings Account. For instance, if you hold a Salary Account with another bank, you can set up automatic transfer of a certain specific amount for your preferred date and ensure sufficient Savings Account balance.
Keep track of your balance
Net Banking and Mobile Banking platforms allow you to track your account balance whenever and wherever you want. This way, you can make provisions to ensure the AMB is maintained when your account balance is running low.
Bottom line
A Savings Account is a fundamental instrument when you step into the world of banking. With HDFC Bank’s Savings Account, you can enjoy a multitude of perks, whether it is exclusive offers with Debit and Credit Cards, access to HDFC Bank’s cutting-edge payment services or preferential pricing on Two Wheeler Loans or other HDFC Bank products.
Open your HDFC Bank Savings Account instantly. Get started here.
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circ*mstances.
