Banks and other financial organizations in the UAE provide a variety of bank accounts to their customers, including savings accounts, current accounts, salary accounts, fixed deposit accounts, and more. These bank accounts have certain restrictions that account users must meet, such as a minimum balance, minimum income, minimum deposit, and more. According to the conditions of the chosen type of account, account holders must maintain a minimum balance. Banks have the authority to assess fees on bank accounts that do not fulfill the minimum monthly requirements. In this blog you will get detailed information on Penalty on Non- Maintenance of a Minimum Balance in Bank Account.
The UAE's compliance standards are becoming more strict by the day, and no business owner wants to be hit with hefty fines if they don't follow them.
- In today's complex world of continuously changing rules and regulations, the way great accounting companies or Smart Accountants maintain accounting records has a huge impact on how well they defend themselves against non-compliance with the law.
- Consider the recent progress made by the UAE Government, as a member of the OECD Inclusive Framework, in enforcing the UAE's Economic Substance Regulations.
- A company based in the UAE must notify the government authorities if it engages in any of the relevant activities outlined in these regulations.
Why Do Banks Apply Penalties?
Non-maintenance of a minimum account balance by account holders is penalized by UAE banks. There may be a variety of reasons why account users are unable to maintain the required minimum amount in their bank accounts. Financial difficulties or the need for emergency finances are among the factors.
Maintaining a minimal amount can be difficult for account users who are financially strapped and barely make ends meet. Account holders in need of emergency money, on the other hand, may be forced to withdraw their minimal amount from their bank account in order to pay their financial obligations.
Know Your Bank Charges
For most people, opening a savings account is a no-brainer. And, as processes become more automated and digitized, people tend to choose a savings account based only on the interest rate offered. However, it's also crucial to be aware of the various charges and fees that banks may levy, because in most circumstances, a little foreknowledge may help you avoid these fees. While the types and amounts of charges differ every bank, you should be aware of the most prevalent ones.
Penalties for a Minimum Balance
Let's begin with the most obvious example. Most banks in the UAE, understandably, levy a monthly fee for non-maintenance of a savings account. A minimum balance is frequently required in savings accounts. If you are unable to do so, your account may be subject to charges. If the account holder does not maintain the minimum balance as indicated, banks normally levy a monthly fee of AED 25 to AED 200. Each bank's minimum balance requirements may differ, so make sure to double-check.
Charges for Account Closure
Most banks charge consumers a fee if they close an account before a specified period of time has passed. If you close your account during the first six months or a year in the UAE, many banks charge roughly AED 100.
Fees for Account Statements
A bank account statement is required in order to have a detailed picture of the account's transactions. However, most banks in the UAE charge between AED 25 and AED 30 for a monthly statement.
Fees for Foreign Exchange
These fees are applied to purchases made with your credit card while travelling overseas or in a different currency. They normally range from 1% to 3% of the total transaction value. Visa or MasterCard will also charge you a conversion fee. If you travel frequently and are looking for a travel credit card, make sure to look into this cost before applying.
Charges for Transferring Cash Abroad
According to some financial experts, UAE expats who make regular foreign fund transfers, whether to meet financial obligations back home or for investment motives, can rack up thousands of dirham in penalties each year. The standard service fees alone can vary depending on the destination of the funds. The cost of sending money to Asia, for example, might range from AED 7 to AED 22 each transaction.
The fees indicated above may differ between banks and account types. So, when you choose a savings account, thoroughly review the schedule of relevant charges to ensure that your savings are protected. If you have an existing savings account, you can check the fees on the bank's website.
How to Avoid from Paying a Penalty?
Account holders who don't wish to keep a minimum balance in their bank accounts can open zero balance savings accounts. You may already have a zero balance savings account if you are a paid employee. These bank accounts are simple savings accounts set up by your employers to facilitate monthly salary transfers. You can use it for your day-to-day transactions instead of a bank account that has a monthly minimum balance requirement.
Aside from that, you might consider opening a simple bank account with few extra features. These bank accounts have no minimum balance requirement (monthly and quarterly). Banks provide these accounts to encourage financial inclusion and assist persons from economically disadvantage backgrounds in better managing their finances
We hope that this blog has given you a better understanding of why bank accounts are subject to penalties and how you can avoid them. If you want to open a simple bank account, go to our website and browse under the bank accounts area to learn more about your possibilities.
You can also get in touch with Dhanguard staff to learn more about the features and perks of the bank accounts you've chosen. Our financial specialists will not only assess your financial needs and recommend appropriate solutions, but they will also walk you through the account-opening procedure and ensure that one is opened as soon as possible. Connect with Dhanguard for more reference related to this topic.