A savings account is an important tool that contributes to your financial well-being. It offers a secure place to deposit your hard-earned money, provides 24/7 access to funds, and also allows you to earn interest.
As you open a savings account, you will likely come across a requirement known as Average Monthly Balance (AMB). This is an amount you, as an account holder, are required to maintain in your account.
Banks generally set monthly, quarterly, or half-yearly average balance requirements based on the account type and location and offer specific facilities or privileges to customers accordingly. Note that if you fail to maintain this balance, you may incur a penalty also referred to as NMC (non maintenance charges), which varies depending on the bank.
This blog explores the concept of AMB, its importance, how banks calculate it, and how you can manage it.
Calculation of AMB
To calculate the AMB, banks follow a specific formula:
AMB = (Sum of daily closing balances)/(Number of days in the month)
For example, if your daily balances for a 30-day month are as follows:
- Days 1-10: ₹10,000
- Days 11-30: ₹20,000
Your AMB would be calculated as follows:
(₹10,000 x 10 + ₹20,000 x 20)/30
This equals (₹1,00,000 + ₹4,00,000)/30, which would be ₹16,667.
To avoid the hassle of manual calculations, you can use an online average monthly balance calculator, which many banks offer on their websites and mobile banking apps. Simply input your daily or periodic closing balances, and the calculator will display if you meet the AMB requirement and, if not, then how much you must maintain in your savings account to avoid charges.
Why does AMB matter?
AMB plays a crucial role in determining the features of savings accounts you receive. Here’s how:
- Interest rates: Higher AMBs typically translate into higher interest rates, which allow your hard-earned money to grow faster.
- Avoidance of fees: Banks often impose fees if your account balance dips below the AMB requirement. By maintaining or exceeding this balance, you prevent these charges or penalties.
- Free account facilities: To qualify for certain features of bank accounts such as free debit cards, reduced loan interest rates, and ATM fee waivers, many banks stipulate the maintenance of a particular AMB.
- Promotes financial discipline: Maintaining an AMB requires regular account monitoring and prudent financial management. This discipline may help in building a substantial savings buffer, which can be crucial for future financial needs or emergencies.
How to enjoy premium banking features without worrying about AMB?
You can consider the IndusInd Bank Indus Delite Savings Account, where you are not obligated to maintain an average monthly balance. This zero-balance account helps you earn a competitive rate on your deposits and allows you to manage your money more freely and flexibly.
Look at the additional benefits of opening a bank account with IndusInd Bank:
| Effortless setup | Quickly open your account online, free from delays and complications |
| Amazon cashback | Earn up to 5% cashback on your Amazon purchases |
| Reward points | Enjoy up to 5% cashback on fuel, dining, entertainment, and OTT |
| Exclusive discounts | Receive up to 20% off on orders from Swiggy and BigBasket |
| Insurance benefits | Get complimentary insurance coverage worth ₹1.5 lakh with your debit card |
Apply now with IndusInd Bank and experience a quick, hassle-free zero-balance account opening online process!
Key takeaways
Understanding the average monthly balance is crucial for managing a savings account effectively. It helps you avoid fees, access better interest rates, enjoy premium digital solutions, and unlock various other banking benefits. You can calculate your account’s AMB manually or with online calculators, whichever you find more convenient.
If managing AMB is challenging, it is wise to consider zero-balance savings accounts like the IndusInd Bank Indus Delite Savings Account. You can avoid the hassle of maintaining a specific average balance while still benefiting from competitive interest rates, premium digital banking features, and all the other benefits of a savings account.
