Updated March 23, 2019
Ano nga ba ang Maintaining Balance in Bank Accounts?
Bakit merong penalty of 300 pesos or more every month for NOT maintaining the Minimum Monthly Average Daily Balance for 2 consecutive months?
Maintaining Balance is the shorter phrase for Minimum Monthly Average Daily Balance (MADB).
Maintaining Balance is the Minimum Average Daily Balance we should have in our savings account or checking account every month.
Why is there a Maintaining Balance requirement?
The banks say they spend money to handle our accounts and maintain our bank records, so they must make some profit from our accounts, and therefore, according to them, we should maintain a certain minimum amount 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 about maintaining balances. 🙂
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 comes out to be 2,000 pesos or more.
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.
One day, you withdrew 500 pesos, resulting in a balance of 1,500 pesos.
Will your balance be reduced by the 300-peso penalty?
Can be Yes, 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. Kasi one month ka lang hindi naka-comply sa balance requirement.
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.
Holidays or Saturdays/Sundays at the end of the month:
If the last days of the month are holidays, or Saturdays and Sundays, the bank computes the MADB on the last banking day before the holidays, Saturdays or Sundays.
For example, April 29 is a Saturday and April 30 is a Sunday, the bank computes the MADB on Friday, April 28.
Is there a Philippine law regarding maintaining balances?
There is. It’s in the Manual of Regulations for Banks (MORB), the implementing rules and regulations of the General Banking Law of 2000 and other banking laws.
These are the rules:
- The minimum MADB and the amount or rate of maintenance fee should be disclosed to the client in the Terms and Conditions of Deposit
- The maintenance fee is charged only if the account has fallen below the required MADB for at least 2 consecutive months.
- If there is any change in the minimum MADB, clients must be notified at least 60 days before the change is implemented. Means of notification are described in the MORB.
- One of the qualifying grounds for the charging of Dormancy Fee is that the account has fallen below the required MADB.
What is Maintaining Balance in Bank Accounts?
Minimum Average Daily Balance (MADB)