Average Balance is the average amount of money maintained in a bank account over a specific period, usually a month, and is used to check minimum balance requirements and calculate charges.
Average Balance is a common banking term used by banks to determine whether an account holder has met the minimum balance requirement. Instead of checking the balance on a single day, banks calculate the average of daily closing balances maintained during a defined period, typically one month.
If the average balance falls below the required limit, the bank may charge a non-maintenance fee. Average balance is widely used in savings accounts, salary accounts (after free period), and current accounts.
Maintaining the required average balance helps customers avoid penalties and may also provide access to additional benefits such as free ATM transactions, lower service charges, and preferential banking services. The required average balance varies by bank, account type, and location.
"If a bank requires an average monthly balance of ₹10,000 and your daily balances during the month average out to ₹9,000, the bank may charge a penalty for not maintaining the required balance."