What Is Maintaining Balance in Bank Accounts?

4.13.2012

Updated Sep 18, 2014

What Is Maintaining Balance in Bank Accounts?

Why do we get a penalty of 300 pesos or more every month for NOT maintaining the Minimum Monthly Average Daily Balance for 2 consecutive months?

What is this Minimum Monthly Average Daily Balance or Minimum MADB? or Maintaining Balance?

Maintaining Balance is the minimum balance we should have in our savings account or checking account everyday.

Or it is the Minimum Average Daily Balance (MADB) that we should maintain for the month.

Why is there a Maintaining Balance requirement?

The banks say they spend money to handle our accounts, so they must make some profit from our accounts, and therefore, according to them, we should maintain a certain minimum of money in our accounts.

The banks check our balances, not everyday, but every end of the month. They compute the average balance for 30 days or 31 days of the month -- that's why it's called Monthly Average Daily Balance (MADB).

They consider the end-of-day balance. If our balance in the morning is 10,000 pesos, and at the end of the day, our balance is 15,000 pesos, they consider 15,000 pesos.

If the required Maintaining Balance is 2,000 pesos, do we need to have 2,000 pesos in our account everyday?

Yes, so that we don't have to think.  :)

But we can have less than 2,000 pesos in our accounts some days, as long as we deposit much more than 2,000 pesos in other days, so that when the MADB is computed at the end of the month, the MADB is still 2,000 pesos or more.

Example:
Your savings account has a balance of 2,000 pesos.
The required MADB  is 2,000 pesos.
The penalty for falling below MADB for 2 consecutive months is 300 pesos.
You withdrew 500 pesos, resulting in a balance of 1,500 pesos.
Will your balance be reduced by the 300-peso penalty?

Can beYes, can be No.

If your balance remains 1,500 pesos over 2 consecutive months, your balance will be reduced by the 300-peso penalty at the end of the 2nd month.

But if you deposited high amounts of money in other days, so that your MADB at the end of the month is 2,000 pesos or more, then your account will not be penalized.

Or even if you fell below MADB for the first month, but you reached your required MADB on the second month, you will not get the penalty.

How do banks Compute MADB?

They add the end-of-day balances for all the days of the month,
and then divide the TOTAL by the number of days of the month
(divided by 30 or 31 or 28 or 29).

Example: April has 30 days:
For the first 5 days of the month, your balance everyday was 2k.
then for the next 20 days, your balance everyday was 1k
and for the last 5 days, your balance everyday was 3k

5 days x 2k = 10k
20 days x 1k = 20k
5 days x 3k = 15k
10k plus 20k plus 15k = 45k
45k divided by 30 days = 1,500 pesos

Your MADB is 1,500 pesos

Obviously, that's below the 2k minimum MADB. If for the next month, your MADB is still below 2k, then your account balance will be reduced by 300 pesos.

Another example: March has 31 days
First 5 days, balance everyday is 2k = 10k
Next 10 days, balance everyday is 1k  = 15k
Next 16 days, balance everyday is 3k = 48k
10k plus 15k plus 48k =  73k
73k divided by 31 days = 2,354.84

Your MADB is 2,354.84.

That's above the 2k required MADB. That means you have maintained your account, so there will be NO penalty.
And that means you are on your way to saving a LOT of MONEY if you continue to deposit and NOT withdraw.

Peso Savings Accounts for OFWs, Usually Zero or Low Maintaining Balance

US Dollar Accounts with Low Maintaining Balances

What is Maintaining Balance in Bank Accounts?
Minimum Average Daily Balance (MADB)

32 comments:

Anonymous said...

i have a newly opened bpi atm direct account for 15 days now i think, the maintaining balance is 3k, im planning to withraw 1k tomorrow and deposit more than 1k by 2-3 days. will i incure any penalty? thanks.

Nors said...

Hi Anonymous, not yet. You'll incur a penalty at the end of the 2nd consecutive month you fall below the maintaining balance requirement. 3k is the maintaining balance? And you had 3k in your account for the past 15 days? So that means you're ok for Feb since your account is newly opened. Yes, maintain more than 3k after you withdraw 1k so that on March 31, the average daily balance would be 3k or higher. You try adding the daily balances and then divide by the no. of days.

Anonymous said...

thanks for that Nors very informative. i have another question, do the counting of days start regulary on a monthly basis or does it start on the day my account was activated?

Nors said...

Hi Anonymous, bank systems check maintaining balances immediately after every 30th or 31st. They check daily balances from the first day of the month to the last day of the month. The penalty is imposed immediately after the 2nd consecutive month that you fall below the maintaining balance requirement.

Anonymous said...

hi. I opened my passbook account noong Jan. 18, 2013. Currently (March 11, 2013) ang balance ko ay P10k. ang maintaining balance requirement ay 1k. ma-pepenaltyhan ba ako kasi hindi ako nakadeposit since last Feb. 18? or ano ang suggested na amount ko na i.dedeposit para di ako ma-penaltyhan? thanks.

Nors said...

No, you will have no penalty because you have 10k in your account, far above the maintaining balance requirement. You are not penalized if you don't deposit in a month or in 2 months or more, as long as your lack of deposit does not exceed 2 years. An account becomes dormant if you do not deposit or withdraw within 2 years.

Anonymous said...

salamat po sa mga information

Anonymous said...

hello po may savings account po ako sa BDO ar may maintaining balance na 2000 what if na withraw ko ito lahat tapos hindi na po ako nakapag deposit for a months ano po mangyayari mag closed na po ba ito?

Nors said...

About BDO maintaining balance: Kapag 0.00 na ang balance, automatic mag-close na. Kapag meron pang natirang cents or few pesos, mag-close siya at the end of the 2nd consecutive month na wala kang naideposit or below required maintaining balance. If merong konting balance at 1 month lang below-required-balance, at sa 2nd month ay 2k or above na ang average daily balance, walang penalty, at active account pa siya.

Anonymous said...

is it legal for banks to have 2 different and separate MADBs for their active and dormant accounts ? for example, their MADB for active accounts is pegged at 5,000.00 while their dormant accounts' MADB is pegged at 10,000.00 ?

Nors said...

About MADBs: Sorry I'm not a lawyer, so you should not rely on my response. But this is my first time to hear about different MADBs for dormant and active. I think you can question them if they insist on applying that rule to you, when they did not disclose that rule to all clients -- that rule should have been disclosed in their passbook, or brochures or any written communication to new clients...
The BSP ruling on MADBs emphasizes the need for disclosure of rules to all clients before implementing such rules...I think there's even a part that says that the client should be notified via a letter to the client's last known address if the account is nearing dormancy or has started to be dormant....

Anonymous said...

Hi, I would like to ask for the service charge/penalty of MADB for deposit account if the balance is below maintain balance for one(1) year. Thank you.

Nora said...

About below-maintaining-balance penalty: That would be 11 months x 300 pesos = 3,300 pesos
So it's better to close an account if one cannot maintain the monthly average daily balance. There are accounts that have low or zero maintaining balance requirements

Anonymous said...

Thank You for the reply. I thought it will automatically closed when it becomes zero balance. I'm just confused from these fees"PHP300 – monthly service charge for falling below the required average daily balance (ADB) for 2 consecutive months". Am I misunderstanding that it will charge me P300 for 2 consecutive months if below ADB or it will charge P300/month for falling below maintain balance. OMG! how can I pay and closed it, I should pay the charges first before closing the account. OMG! I'm unemployed for almost a year. Is there any ways to stop the continuous charge/penalty. Thanks in advanced. You're really helpful. Ms. Nora

Nora said...

No, no, no, don't pay the penalties if the balance is already zero for too long! No! Forget this account. The bank will not go after you. When you get employed again, or receive some money later on, open another account in another bank or another branch.
I answered your question that way because of how you asked your question. I thought you have a balance of 3k or 5k or more...because you asked for 1 year! For example, your account fell below maintaining-balance for 2 consecutive months, 300 will be deducted at the end of the 2nd month. If it's still below maintaining balance the 3rd month and there's still a balance, another 300 will be deducted. If after this 2nd deduction, your account becomes negative or zero, your account will automatically close. If you left your account with zero balance for many months already, forget this account.

Anonymous said...

Thank You GOD & to YOU. So you're telling me to just ignore any contacts & letters from staff/personnel of the bank. I'm feel worried about being arrested for these situation that's why I'm browsing some issues like this thru internet. By the way, Is it possible that they will file complaints regards to it and arrest me. I also ask my friend working in a bank for this situation. Anyways, hope will not be arrested for this and that I'm worried about that's why I'm too eager to find what to do and what will happen... I'm sorry for the inconvenience Ma'am Nora, you're a life saver for sharing and answering my questions. THANK YOU SO MUCH AND GOD BLESS....

Nora said...

God bless you too.
No, the bank will not pursue you, will not file a charge against you, and will not have you arrested. What for? What's the charge? What's your crime? None. It's not a crime to open a bank account and leave it with a balance below the minimum balance requirement or leave it with a zero balance or negative balance. Sa totoo lang, maraming-marami ang nako-close na account due to zero balance or negative balance. Meron na rin akong hinayaang na-close na bank accounts for different reasons, and I didn't close them formally.
Meron din kasing cost ang mag-maintain ng account na wala namang laman, so these accounts are automatically closed. Sometimes, some banks write just to inform na iko-close na nila ang account, pero hanggang doon lang yon, at bihira ito, additional cost pa nila.
So, feel relaxed na, and keep praying for another job, a better job.

Anonymous said...

I'm almost felt relaxation but last question Ma'am, they've said about "Account will be dormant effective november 2013 and service charge is continuous" if I'm going to calculate this in the next another 2yrs from additional past 2 yrs total of 4yrs for example, the charge/penalty would be almost 15k pesos. My last question here is does Automatically closing of bank accounts is applied or implemented to all Banks in the Philippines. I'm not saying I'll do it to my succeeding bank accounts. I'm sorry for all these questions. Thank you & God Bless. I'm praying on having another better job. Your help is very much appreciated.

Nora said...

I got really curious about your case -- that they sent you that letter -- so I searched the 2 Pinoy forums that I sometimes visit, and I found one similar case to yours. It was with Metrobank. Is yours also Metrobank?
This one closed his account, and then after 2 years he got a letter from Metrobank telling him to fix his dormant account or else the charges continue accumulating. He called the hotline, and he was instructed to visit the Metro Mla branch in person, even if he was far away in the province. When he arrived at the branch, the teller told him to disregard the letter! Unbelievable! The thread was in 2009 though.
I went on through the other forum threads, and the bankers there generally said the same thing -- that accounts automatically close after they zero out, and that there's no law broken if these accounts are not closed in person.
I have an inkling that Metrobank's automatic account closure or automatic dormancy and below-maintaining notification system has a bug or defect, so it sends out these letters even to those with negative balances or to those whose accounts should have been closed months or years before. Banks are required by the BSP to send out notifications for accounts that are about to get dormant.
If you like to see these comments, just type on google search tab this: close account site:pinoyexchange.com and you can see several search results
This can be a good topic for an article when I have time... :)

Anonymous said...

Yes its Metrobank, I'm browsing also other information with regards with these situation. I also look for the BSP law if the bank can file complaints against me if I will not visit the bank and closed my account. But I notice something written on the letter like "Visit us and reactivate your account." so the first thing comes in my mind is that they just wanted me to come then pay for the penalties for reactivation of the account but for almost 2yrs I didn't use the ATM card and I expect that It was automatically closed due to I left it below 100 pesos so the deduction will occur until it becomes zero balance. I also ask my friend working in a different bank and says that it will close automatically even if I left a positive balance it will deduct until it turns negative and zero balance. Thank you for your time, I appreciate it Mam. God Bless Always.

Anonymous said...

Question :

What if po I am planning to withdraw on the day of 30 and 31 considered po ba ito na may penalty ?

Nora said...

About withdrawing on the 30th and 31st: You can withdraw anytime, as long as you can maintain your monthly average daily balance (MADB) requirement for 2 consecutive months. Kung hindi mo man ma-maintain ang MADB this Dec 2013, make sure na ma-maintain mo this Jan 2014 para hindi magkasunod na below-MADB. Merong penalty kapag magkasunod na buwan na below MADB. Ang penalty ay nababawas sa end of the 2nd consecutive month na below MADB at every month na up to the time na naibalik mo sa above MADB

Anonymous said...

How can this happen to a payroll account na twice a month may pumapasok na pera? (say, minimum of 5k every 15th and 30th of the month. Ibig sabihin kahit i-withdraw mo ang buong 5k sa 15th walang penalty kasi may e-expect ka naman on the 30th which is i am sure that the maintaining balance is below 5k, I have bpi savings account.

Nora Tamba said...

About maintaining balance requirements for payroll accounts:
Usually, payroll accounts are free of the maintaining balance requirement. It is the company's corporate account (that feeds the payroll accounts) which are required to maintain a certain MADB.

Nora Tamba said...

September 11, 2014 at 6:22 AM
About BPI account with zero balance for 2 years:
Hi, may i ask regarding my bpi savings atm. it's been a long time that it's zero balance; i think almost 2yrs. If I deposit more than the maintaining balance, would they still charge me penalty or service charge? Say i'll deposit 5k, would i be penalized considering it's been 2 years that i had zero balance? Thanks in advance!

Is this a regular account? And not a BPI Easy Saver?

Usually when a regular bank account balance becomes zero, 0.00, the account is automatically closed, or put on hold until the end of the month, and then closed.

Try using your atm card at a BPI atm; the screen will most likely show "Account Closed" or "Account Not Existing" or "Account Not Valid".

You can open a new account, and start saving again.

Anonymous said...

Hi Anonymous. what would be your suggestion, account with maintaining balance or account with no maintaining balance? what are they differences except the maintaining balance? for example. "Security, Services, etc..... thanks in advanced.! :)

Nora Tamba said...

Kevin Quilala October 25, 2014
Hi, I don't have an atm card yet but I'll apply maybe next week. For instance, the maintaining balance is 3k, so every time I withdraw, I leave 3k in the account, I won't get a penalty? And what about if I don't use the card for a long time, like for 4 months, but it has a balance of 3k, does it get a penalty?

Hi Kevin, yes, you're right, you won't have a penalty as long as you always leave 3k in the account. That's a better way to do it. No, you don't get a penalty even if you don't use your card in 4 months or more (up to 23 months), as long as you have 3k or more in your account.

There's another penalty, and it's called dormant account penalty. This is when you don't have any withdrawal or deposit within a period of 2 years or 24 months.

Nora Tamba said...

About differences between account with or without maintaining balance requirement:
About security: Savings accounts are insured by the PDIC. Cash cards (these have no maintaining balance requirements) are not insured because they're not considered deposit accounts.
About services: Atm withdrawals for savings accounts are free at the atm machines of your bank. Some accounts or cash cards without maintaining balance requirements charge atm fees.
About interest rate and balance to earn interest: Usually the same.

Nora Tamba said...

QUESTION:
Hi, about maintaining balance, is it being charged so it will complete the maintaining balance? 5,000 is the maintaining balance. When I computed, 4,500 has been charged in all. If the charge reaches 5,000, will the charging stop? Thanks.
ANSWER:
Hi, I'm puzzled that you allowed the bank to charge you so many times that your total charges reached 4,500! Why did you not just withdraw your money and close your account?
No, the charge will not stop. You will be charged every month as long as money is being deposited but the maintaining balance requirement is not complied with.
If you need a bank account for remittance, you can open a BDO Kabayan account (it has no maintaining balance requirement as long as your account receives at least 1 foreign remittance every 12 months).
Or you can open a BPI Easy Saver account -- this also has no maintaining balance requirement, and in exchange, you're charged 5 pesos for every atm withdrawal or balance inquiry.
There's also a BDO cash card (no maintaining balance requirement). Get the one that can contain up to 25k pesos.

Anonymous said...

Good day po. This page has been very helpful. Tanong ko lang po, dahil ilang months na rin po ang BDO nag service charge sa account ko.. Kung formally ko pong iko-close yung account ko by going to the branch personally dahil hindi ko na po naaabot yung MADB, pababayarin pa po ba nila ko ng 300pesos? I'm planning po kase na i-withdraw muna lahat nung balance bago pumunta sa branch at ipa-close yung account, saka na lang mag-open ulit ng panibago sa another branch kapag sufficient na po yung pera ko..

Nora Tamba said...

About 300-peso penalty:
QUESTION from Anonymous:
Good day. This page has been very helpful. BDO has been deducting service charges from my account for some months. If I formally close my account by going to the branch personally as I have not reached the MADB, will they charge me 300 pesos? I'm planning to withdraw all my balance before going to the branch to close my account, and then open a new account at another branch when I have sufficient money.
ANSWER:
It's now the 29th. Yes, you better withdraw all your balance today before another 300 pesos is deducted from your account at the end of day on Nov 30. That's tomorrow. If there's 30 to 90 pesos left (since we cannot withdraw less-than-100 peso amounts via atm), if you like, you can use your atm to buy something worth 30 to 90 pesos from Save More and use your BDO atm to pay it. Assuming you have withdrawn your balance, when the 300-peso fee is charged at end of day on Nov 30, your balance becomes negative, and your account will automatically close.

Anonymous said...

Question lang po about Bancnet, any member bank po ba like Allied Bank or EastWest, basta nakalagay sa atm yung logo ng bancnet, free ng charge pag nag-withdraw dun?

THANK YOU VERY MUCH FOR YOUR COMMENTS.
 
 
 
 
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