Closing your bank account? Do this first

Banks often levy additional charges, especially in the form of non-maintenance charges. According to Minister of State for Finance & Corporate Affairs, in the last 3 years alone, savings account holders have paid around Rs 9,721 crore to both public and private sector banks in the form of penalties for not maintaining the minimum balance in their savings accounts. This amount collected through the levy of charges for non-maintenance of minimum balance in savings bank account includes 18 Public Sector Banks (PSBs) and 4 major private sector banks.

If you wish to close your account but if such charges have been levied on your account, you will not be able to close your bank account. Note that banks will not let you close your own account until you clear the charges that they have levied on your account. Customers will have to pay off those charges to be able to close their account. Experts, therefore, suggest that one should try to maintain one’s minimum-average balance before closing the account. This way they will be able to avoid attracting additional charges.

Additionally, if you wish to close your account within a year of opening it, your bank will levy a closure charge. You can also avoid this charge if you close your bank account within 14 days of the opening of the account. However, if you apply for closure of the account after 14 days but before a year, you will have to pay account closure charges. Closure of an account after 1 year, however, does not attract closure charges.

Note that banks are not limited to charging their customers only for non-maintenance of minimum average balance, there are various other charges as well that are levied. These charges include cash transactions, digital transactions, withdrawal from ATM beyond free limit charges, SMS alert charges, and so on. Banks claim that levying various charges on customer services and activities help them recover the cost they incur for running their day-to-day operations across branches. Though this is true to some extent, for several services customers are overcharged without their knowledge, especially by private banks.

Hence, customers should be aware of all such charges, and if they are not satisfied, they can move to another bank with lesser/genuine charges or opt for a zero balance account. To get the best possible banking solution, compare the cost of various banks and service standards.

For non-maintenance of monthly average balance, banks usually levy Rs 200 to Rs 800 per month. In the case of PSU banks, the charges are a little lower. For cash transaction charges per transaction at branches beyond the free limit, an amount ranging from Rs 5 to Rs 150 is charged, based on the amount of transaction. Charges on ATM transactions are also levied beyond the free limit, which ranges from Rs 20 to Rs 40 for each transaction for private sector banks and Rs 5 to Rs 10 for PSU banks. Though for most banks the NEFT fees and RTGS fees are not charged on online transactions, some banks still levy a charge up to Rs 50 for these transactions.

On closure charges, the Reserve Bank of India (RBI) does not have any specific guidelines and, hence, it is totally up to the discretion of the bank to levy service charges. Even though the RBI hasn’t provided any guideline on these charges, it has asked banks to ensure that account holders with a low volume of activities should not be penalized while fixing charges.

Source: Financial Express