Starting June 1, several banks in the UAE will increase the minimum monthly balance requirement on personal accounts from Dh3,000 to Dh5,000, according to a report by Arabic daily Emarat Al Youm. One bank has reportedly already begun implementing the updated charges.
Under the revised terms, customers who fail to maintain the new Dh5,000 minimum balance will be subject to a Dh25 monthly fee, unless they hold a credit card or personal financing with the bank.
Exemptions Based on Salary and Account Holdings
According to a document cited in the report, banks will waive the Dh25 fee under the following conditions:
- Customers maintaining a total account balance of Dh20,000 or more.
- Individuals with monthly salary transfers of Dh15,000 or more.
- Customers with salary transfers between Dh5,000 and Dh14,999 who also have a credit card, overdraft, or loan with the bank.
However, individuals with monthly salaries between Dh5,000 and Dh14,999 who do not hold a credit facility will incur a Dh25 fee. Those earning less than Dh5,000 per month will also face this fee unless they meet the exempted criteria. In certain cases, account holders who do not fit into these categories may be charged between Dh100 and Dh105, depending on the type of account they hold.
Impact on Low-Income Earners
Dr. Ben Lebig
Finance Specialist
Impact on Low-Income Earners
Financial expert Dr Ben Lebig expressed concern over the policy’s impact on lower-income workers, particularly those in the service sector:
“This new policy, while economically sound due to rising overhead cost of bank services, puts many of the residents at a disadvantage. There are UAE residents — especially those in the service sector — who do not enjoy high salaries and, many, if not most, would fall below the proposed threshold.”
He warned the policy may force workers to either limit spending and remittances or take on financial products they wouldn’t otherwise choose:
“Workers would have to reduce the amount they spend for their own needs and the amount they remit to their families back home so they can build the minimum balance requirement. Or, they will be forced to take credit cards or loans to comply with the requirements.”
“For those workers whose salary is just enough to cover their monthly expenses and sending money back home, this rule seems nearly impossible to fulfill.”
He urged banks to adopt more inclusive policies:
“I sincerely hope banks will reconsider increasing the minimum balance or, at the very least, provide a range of minimum balances and charges depending on the various salary ranges. This way it will minimise the impact to the low-income workers.”
Expert Insights: Financial Implications for Residents
Vijay Valecha
Chief Investment Officer at Century Financial
Expert Insights: Financial Implications for Residents
Explaining the rationale behind these policies, Vijay Valecha, Chief Investment Officer at Century Financial, noted:
“A minimum balance is the least amount of money that is required in a bank account to keep it active or get benefits like earning interest.”
“Banks set these minimum balances for several reasons. It helps them have more money in deposits, which they can use to give out loans and meet financial rules set by regulators. Increasing minimum balance requirements helps banks to profit from the extra fees earned and cover the high costs of maintaining customer accounts.”
The current Dh3,000 requirement has been in place since 2011 for customers without credit cards, overdraft facilities, or personal loans.
Alternative Salary Disbursement Solutions
Valecha suggested that companies could explore alternatives to traditional banking, especially for employees earning below the new minimum balance requirement. He pointed out that using money exchange services under the Wage Protection System (WPS) could provide better access:
“Companies have the option of sending salaries through money exchanges or financial institutions as part of the Wage Protection System (WPS). They provide reliable salary disbursement and support for WPS compliance.”
He added that Payroll cards, offered by exchange houses, are a cost-effective solution for SMEs and provide benefits like unlimited withdrawals and improved security.
“Another option for companies is to open a corporate account so that employees earning a salary of less than Dh5,000 can benefit from prepaid salary cards, which do not require a bank account.”
“There is also an alternative to open low-cash-balance accounts inside the UAE or open a zero-balance account, or use digital account services which require zero fees and charges.”