For saving account which option should be preferred zero balance or a minimum balance?
Many people raise this question after they conceive to open saving account in a bank.
Some individuals recommend you open a minimum balance bank account whereas other recommendations you open a zero balance account. However, to settle on that account is appropriate for you isn’t therefore troublesome if you perceive your demand.
According to various studies, banks are imposing heavy penalties on customers for not maintaining minimum balance in their savings accounts. Banks claim that these penalties are imposed to encourage customers to maintain the minimum balance in their accounts and develop saving habits among them.
Many people belong from the weaker section of the society and are unable to maintain a minimum balance. They find difficulty in maintaining the required minimum balance in their saving account.
However, to encourage saving among the weaker section of society, the facility of zero-balance accounts is provided by almost every bank.
In Zero-Balance-Account, there is no requirement to maintain any minimum balance. There is no penalty if the account holder keeps zero balance in his account.
Features of Zero Balance Account
- No Minimum Balance
Zero Balance Account Holders’ are not required to maintain a minimum balance. Bank will not charge any fees if the account holder maintains zero balance in their account. This is the major feature of zero-account which attracts many customers.
- ATM cum Debit Card & Free Passbook
Bank offer ATM cum Debit Card and free Passbook to the zero account holders at free of cost. No fees are charged from them for this service. The account holders can withdraw money from any ATMs.
Banks also offer net-banking facilities to zero accounts. The account holders can receive, transfer, check balance from anywhere in their phone or from PC.
- Interest Rate
The rate of interest of the minimum balance savings account and zero balance account is the same.
- Fixed Deposit and Recurring Deposit
The zero balance saving account holders can open a fixed deposit or recurring deposit account in the same branch. There is no restriction on it. However, if the account holders want to open a minimum balance saving account in the same bank then they have to close the zero-balance account within 30 days.
However, there are few conditions in the zero-balance account
Limitations of Zero Balance Account
- An upper monetary limit of balance that can be maintained anytime in this account is Rs 50,000/-
- An upper monetary limit to the total of credits made to this account in a year is Rs 1,00,000/-
- An upper monetary limit to the withdrawals made to a particular month is Rs 10,000/-
- A maximum of 4 withdrawals in a particular month. This includes withdrawals from ATMs and other modes like RTGS, NEFT, clearing, branch cash withdrawal, online transfer, etc.
Can You open both Minimum and Zero Balance Account?
No, a person can open either a minimum saving account or zero balance saving account in a bank.
Suppose you have a minimum balance account then you can’t convert it into zero balance account. However, you can open a new zero-balance account but you have to close your regular account (minimum balance saving account) within 30 days from the opening of the zero-balance saving account. If you fail to close it within 30 days then the bank will automatically close your regular savings account.
Which account is preferred?
There are both benefits and limitations of zero-balance-saving accounts. So, it is not possible to say that the zero-balance account is most suitable for you. The biggest benefit of this account is that you don’t require to maintain minimum balance while the biggest disadvantage is that you can’t withdraw money for more than 4 times.
However, some banks offer the facility to withdraw money for more than 4 times but they charge fees for that. It is also seen that many zero-balance accounts are converted into minimum balance saving account when deposit holders start withdrawing more than 4 times in a month.
A zero-balance account facility is offered to those people who can’t maintain the minimum balance so the conditions imposed on this account also seem genuine.
On the other hand, there are penalties if you fail to maintain a minimum balance. And this is the biggest disadvantage of the minimum balance savings account.
So, you have to decide, whether you can maintain the minimum balance in your account or not. If you think maintaining the required minimum balance is impossible for you then it is recommended that you must choose zero -balance account where you will get all the banking services free of cost. But you should keep in mind that neither you can withdraw more than 4 times in a month nor more than Rs 10,000/- in a month.
But if it possible for you to keep a minimum balance in your savings account then it is recommended that you must open this account. This is because the limitation of withdrawing money may put you in trouble if you need money in case of an emergency.
In a minimum balance account, you can do a lot of transactions in a month, like online shopping, transferring money to relatives or friends which is not possible in a zero-balance account.
Apart from that, the requirement to keep minimum balance will develop the saving habit and you will earn interest amount on your bank balance.