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5 Ways To Avoid Penalties On Cash Transactions & Minimum Balance

Adhil Shetty
5 Ways To Avoid Penalties On Cash Transactions & Minimum Balance

Recently, private and public banks in India announced various penalties for non-maintenance of minimum balance in Savings Accounts as well as the imposition of limits on free ATM usage. This has put an end to the good old days you could dip into the neighbourhood ATM any time you wanted hard cash.

What we need in the new financial year is a fresh look at how we use cash, and what steps we can take to switch to transaction modes where there are no limits and penalties.

Here are some tips and suggestions on how to avoid penalties or charges associated with non-maintenance of minimum balance and ATM cash withdrawals.

1. Ensure adequate minimum balance

With banks levying penalties on non-maintenance of minimum balance in accounts, ensuring you maintain a minimum balance should be a priority for you. Check with your bank about how they calculate the average balance for your account. Maintaining a higher balance can be a way for you to unlock higher levels of services.

For example, if you have an SBI Savings Account with an average monthly balance between Rs. 1,000 to Rs. 25,000, you get only five SBI branch ATM transactions for free. However by maintaining an average minimum balance above Rs. 25,000, there is no limit on same branch ATM transactions.

Likewise, maintaining an average monthly balance above Rs. 1 lakh means you get limitless ATM use at the same branch as well as ATMs of other banks, both in metros and non-metros.

2. Downgrade your bank account

If you think the minimum balance requirements are too stringent, downgrading your savings bank account can help.

For example, if you have a regular savings account with SBI, you can downgrade or open a new account under the basic savings account category. Under this category, you get an ATM-cum-debit card free without any annual maintenance charges.

However, there is a maximum withdrawal limit of four transactions per month including ATM withdrawals.

3. Use Mutual Funds ATMs

Instead of opting for ATM cash withdrawals from your savings bank account, you can opt for Mutual Funds that come with such facilities. Many debt funds offer cards allowing for partial fund withdrawals without any charges or cap on usage.

Reliance Anytime Money card, for example, offers cash withdrawal facility at Visa-enabled ATMs and also POS transactions just like a regular Debit Card. The card has a cash withdrawal limit of 50% of the balance in the primary scheme, or Rs. 50,000, whichever is lower. Additionally, you get free SMS and e-mail alerts on every transaction.

4. Embrace card payments, earn rewards

If you haven’t been using cards to make purchases so far, now would be a good time to go plastic. Instead of paying by cash or cheque, use your ATM cum Debit Card to make payments for your everyday needs like groceries.

Card payments do not come with additional costs. Also, you are likely to accumulate reward points depending on your card type, which can be redeemed as cash, discounts, offers and gift vouchers.

5. Change your cash withdrawal habits

If you make frequent trips to your bank ATM, maybe it’s time to change this habit. Even if you’ve adopted cards, e-wallets and UPI, you may still need cash for certain transactions.

So instead of withdrawing a small amount of cash every week or ten days, withdraw a larger amount that would last you the entire month. This way, you can maintain your liquidity and not fall foul of ATM withdraw limits.

India’s banking industry has experienced some major upheavals in recent months. The rules regarding how we earn, spend and get taxed have changed dramatically. All this has been done to move us closer towards becoming a cashless economy.

While this may not be an easy adjustment to make, with small tweaks to the way you manage your money, you could get there quite comfortably.