Understanding Bank Fees and Charges When You Open Your First Bank Account

Banks across India are providing a wide range of financial products to cater to the needs of customers across all income groups. With the rapidly evolving financial services sector in the country, banks are coming up with innovative investment instruments, credit facilities, and other financial products to meet the needs of customers across all income groups.

A savings account has become crucial for all financial transactions and a customer’s relationship with a bank begins with the opening of an account.

In India, any resident individual over the age of 18 can open a savings account. A savings account can also be opened in the name of a minor through parents and legal guardians. Valid KYC documents, including Aadhaar and PAN, are required to open a bank account.

Lenders offer a variety of bank accounts with different benefits and facilities to their customers. When opening your first bank account, it’s advisable to check details about the fees and charges levied by the bank for the services.

Let’s take a look at various savings account fees and charges levied by banks for services and financial transactions.

What are bank account fees?

Almost all banks collect certain fees pertaining to services they provide linked to your savings account and different financial transactions. The fees and charges may vary depending on the type of account, payment threshold, transaction volumes and other additional services. Some bank fees, like annual service charges, are unavoidable. The fees and charges may differ from bank to bank depending on their internal policies.

Types of bank account fees

Here are the most common fees and charges levied by banks for various financial transactions:

Account maintenance fee: Banks may charge you a yearly fee for the services on your savings account. This is called an account maintenance fee. It can be waived off in some cases depending on the account type and the transaction volume.

ATM withdrawal charges: All savings accounts come with a debit card to facilitate withdrawals from ATMs. Banks can charge you a fee if you use your ATM cards for transactions beyond the approved limit. Banks allow a certain number of ATM transactions for free. Usually, banks offer you five free ATM transactions each month and then charge around Rs.21 each time you use the service beyond this limit.

Chequebook re-issuance fee: When you open a bank account, the bank usually gives you a chequebook for free in the welcome kit. If you need an additional chequebook, the bank may charge a fee. This fee may differ depending on the account type and the bank’s internal policy.

Minimum balance charges: Some bank accounts require you to maintain a minimum average monthly balance at all times in order to avoid penalties.

Overdraft charges: Many banks offer an overdraft facility on certain savings accounts. This allows you to withdraw more money than your available balance as per a pre-defined limit. The facility is provided at an additional fee.

Foreign currency exchange charges: When conducting transactions involving foreign currency with your bank account, such as buying things abroad or travelling to a foreign country, you may have to pay foreign currency exchange fees. To reduce these costs, consider using multi-currency accounts or credit cards that offer favourable foreign exchange rates.

Account closure fees: This fee is usually unavoidable. If you decide to close your account, the bank will charge you an amount. The charges vary from bank to bank.

While it is important to understand fees and charges before you open a bank account, it is also crucial to note that many of these can be avoided if you make informed decisions. Choose a bank account that does not come with too many charges. Maintain the minimum account balance, or opt for an account that has the provision for zero balance. Even if you do not use your bank account frequently, make a few transactions to keep the account active.

This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.