What is a service charge on your account?

What are service charges?

Service charges are fees levied by banks, financial institutions, or service providers for performing specific operations or delivering certain services to customers. These charges are typically applied to cover administrative and operational costs involved in managing customer requests, processing transactions, or maintaining account-related infrastructure.

In the context of banking, service charges may be applied for various activities such as issuing demand drafts, cheque book requests, ATM withdrawals beyond free limits, account maintenance, SMS alert facilities, or even for non-maintenance of minimum balance. These charges are predefined by the bank and are usually disclosed in the schedule of charges provided to customers at the time of account opening or through regular updates on the bank’s website.

Apart from routine account services, service charges may also apply to digital payment transactions. For instance, banks may impose separate fees for electronic fund transfers such as NEFT charges, RTGS fees, or IMPS fees, depending on the mode, amount, and timing of the transaction. While many banks offer these services free of cost up to a limit, additional transfers or higher-value transactions may attract nominal fees.

It is important for customers to review and understand these charges to avoid unexpected deductions and manage their banking costs effectively. Transparency in service charges also promotes better financial planning and informed decision-making while selecting banking products or services. Regularly checking fee structures and opting for digital or bundled plans can help minimise these costs.

Types of service charges

• Account maintenance chargesThese are periodic fees levied for maintaining a savings or current account. Banks may charge this monthly or annually, especially for premium or zero-balance accounts.
• Minimum balance penaltyIf the account holder fails to maintain the prescribed average monthly or quarterly balance, a penalty is deducted as a service charge.
• ATM usage chargesBeyond a certain number of free transactions per month, banks charge a fee for both cash withdrawals and balance inquiries at ATMs.
• Cheque book issuance chargesWhile some cheque books are issued free, additional requests beyond the complimentary limit may attract service charges.
• SMS alert chargesFees are charged for receiving SMS alerts related to account activity. Some banks offer it free, while others charge a nominal monthly or annual fee.
• Debit card issuance and renewal feesBanks may apply charges for issuing or renewing debit cards, particularly for premium variants with additional features.
• NEFT chargesAlthough NEFT is often free, some banks impose NEFT charges for transactions done at the branch or exceeding specific limits.
• RTGS feesFor high-value transfers above Rs. 2 lakh, RTGS fees may apply depending on the bank's policy and the mode of transaction.
• IMPS feesInstant transfers via IMPS may attract IMPS fees, especially for transactions conducted through mobile or branch channels.
• Demand draft and pay order chargesA service fee is applied when issuing demand drafts or pay orders, usually based on the amount and destination.

Understanding these service charges helps customers make informed banking decisions and avoid unnecessary deductions.

—NEFT / RTGS / IMPS Transactions

Transaction Type	Amount Range	Mode	Typical Charges	Description
NEFT	Up to Rs. 10,000	Branch/Online	Rs. 2.50 – Rs. 5 + GST	Used for low-value fund transfers; ideal for basic peer-to-peer transactions.
	Rs. 10,001 to Rs. 1 lakh	Branch/Online	Rs. 5 – Rs. 10 + GST	Suitable for routine individual payments or bill settlements.
	Rs. 1 lakh to Rs. 2 lakh	Branch/Online	Rs. 10 – Rs. 15 + GST	Often used by SMEs and freelancers for client payments.
	Above Rs. 2 lakh	Branch/Online	Rs. 15 – Rs. 25 + GST	Best for higher-value personal or business fund transfers.
RTGS	Rs. 2 lakh to Rs. 5 lakh	Branch/Online	Rs. 20 – Rs. 30 + GST	Real-time settlement for high-value payments; often used for real estate, etc.
	Above Rs. 5 lakh	Branch/Online	Rs. 35 – Rs. 55 + GST	Ideal for bulk payments and corporate transactions requiring urgency.
IMPS	Up to Rs. 1 lakh	Mobile/Net Banking	Rs. 5 – Rs. 10 + GST	Instant, 24x7 payment facility through mobile apps and UPI-enabled platforms.
	Rs. 1 lakh to Rs. 2 lakh	Mobile/Net Banking	Rs. 10 – Rs. 15 + GST	Used for urgent payments during bank holidays or after hours.
	Above Rs. 2 lakh (if allowed)	Mobile/Net Banking	Rs. 15 – Rs. 20 + GST	Some banks permit high-value IMPS transfers with added authentication.

Note: These NEFT charges, RTGS fees, and IMPS fees are subject to change by individual banks. Many banks offer zero charges for online modes.

—Cheque Returns and Debit Card Fees

Service Type	Trigger/Event	Typical Charges	Details
Cheque Return – Insufficient Funds	Cheque bounces due to low balance	Rs. 150 – Rs. 750 + GST	Considered a serious offence; may impact credit score and attract legal action.
Cheque Return – Technical Reasons	Includes outdated cheques, errors	Rs. 50 – Rs. 150 + GST	Common in cases of signature mismatch or stale cheque dates.
Debit Card Issuance Fee	New card issued at account opening	Rs. 100 – Rs. 300 + GST	Varies based on card type (classic, platinum, or premium).
Annual Maintenance Fee	Annual fee for debit card usage	Rs. 100 – Rs. 500 + GST	Automatically deducted once a year unless waived by the bank.
Replacement Card Fee	Lost or damaged card replacement	Rs. 150 – Rs. 250 + GST	Additional charges may apply for express delivery.
PIN Reissue Fee	Request for reissuing debit card PIN	Rs. 25 – Rs. 50 + GST	Charged for physical PIN reissue; often waived for online requests.
International Transaction Fee	Debit card used for cross-border payments	2% – 3.5% of transaction value	Applied on currency conversion and transaction value; varies by card issuer.

These service charges are non-refundable and should be reviewed regularly in your bank’s schedule of charges.

—ECS (Debit) Returns

Reason for ECS Return	Description	Typical Charges	Implications
Insufficient Balance	Account balance is too low to honour the ECS	Rs. 250 – Rs. 750 + GST	Often leads to penalty from both bank and service provider (loan/EMI company).
Invalid or Expired Mandate	Mandate not updated or expired	Rs. 50 – Rs. 150 + GST	Common when ECS mandate is not renewed or account details are incorrect.
ECS Amount Exceeds Limit	ECS debit amount is higher than authorised limit	Rs. 100 – Rs. 200 + GST	Especially relevant for loan EMIs or utility bills with variable amounts.
Technical Errors	Processing failure due to internal system issues	Nil to Rs. 100 + GST	Banks may waive fees for their own system failures.

ECS (Electronic Clearing Service) return charges are levied per instance and can result in additional penalties from billing organisations. Always ensure mandate limits and balances are sufficient to avoid such service charges.

How to avoid unnecessary service charges?

Avoiding unnecessary service charges begins with understanding your bank’s fee structure and making informed financial decisions. Many fees are avoidable with careful planning, proper usage of banking facilities, and awareness of account-specific conditions.

To start, always maintain the minimum average balance required in your savings or current account. Falling below this threshold often triggers non-maintenance penalties. If you find it difficult to meet such requirements, opt for zero-balance accounts or basic savings accounts which typically carry fewer charges.

Limit excessive ATM withdrawals beyond the free monthly limit, as banks levy charges per additional transaction. Instead, plan consolidated cash withdrawals. Similarly, avoid frequent requests for physical statements, cheque books, or PIN reissues, all of which may carry service fees.

Choose online channels for fund transfers to reduce NEFT charges, RTGS fees, or IMPS fees, as digital transfers are often cheaper or free compared to branch-initiated transactions.

Another key strategy is timely loan and EMI repayments. Failing to honour ECS mandates or cheque payments can result in steep penalties and affect your credit record. Keep track of your due dates and ensure sufficient balance in linked accounts.

Review your account type periodically. Some premium accounts offer bundled services with fee waivers, while others may not be cost-effective if underused.

By using mobile or internet banking responsibly and staying informed through official bank communications, you can minimise or even eliminate many recurring service charges, saving valuable money over time.

Digital banking charges

With the rise of online financial services, digital banking has become the preferred mode for most transactions. However, while it offers convenience and speed, it is important to understand that certain digital banking charges may apply depending on the nature and volume of your activities.

Banks typically do not charge for basic services like checking balances, mini statements, or UPI-based payments. But beyond standard usage, charges may be applied for activities such as exceeding free IMPS or NEFT transaction limits, initiating fund transfers from net banking platforms after hours, or requesting duplicate e-statements.

While many institutions offer free NEFT charges or IMPS fees for online transactions, charges may still apply depending on the value or frequency of the transaction. Similarly, real-time RTGS fees are often exempted for corporate or priority customers, but applicable to individual users transferring high-value funds via web portals.

Additionally, digital banking services such as standing instruction setups, online demand draft requests, or utility auto-debit registrations may carry small processing fees. These are typically listed under each bank’s schedule of service charges.

Charges may also be imposed for SMS alerts, especially for low-value transactions, or for exceeding login attempts, password resets, or failed OTP validations on secure platforms.

To avoid unnecessary digital charges, users should stay within the free usage thresholds, prefer UPI for small-value transactions, and familiarise themselves with their bank’s digital service fee guide. Always opt for app-based and internet banking solutions over branch visits for faster, often more affordable financial management.

International transaction fees

International transactions, whether conducted online or through a physical debit/credit card swipe abroad, often incur additional costs known as international transaction fees. These are levied by banks and payment networks to cover currency conversion, processing, and cross-border service expenses.

Typically, banks charge a markup fee ranging from 2% to 3.5% on the total transaction amount for foreign currency conversions. This applies even if you use your domestic card to shop from international websites. Additionally, international ATM withdrawals may attract fixed fees per transaction, along with the applicable currency conversion rate.

Card issuers may also apply network processing charges—these are fees collected by Visa, Mastercard, or other international payment networks for handling cross-border transactions. These charges are added over and above the original purchase amount and can be reflected as separate entries on your statement.

Moreover, dynamic currency conversion (DCC) may cause hidden fees. DCC allows merchants to charge you in your home currency instead of the local currency abroad. While this seems convenient, the exchange rates offered are typically unfavourable, leading to higher effective costs.

It is also important to note that certain banks charge annual international usage activation fees or impose limits on foreign spending without prior approval.

To reduce international transaction expenses, choose cards with low or zero foreign transaction fees, disable DCC when offered, and monitor exchange rates before making large purchases. Being aware of these service charges ensures better control over cross-border spending and helps avoid surprises on your monthly statements.

Fee waivers and exemptions

Many banks and financial institutions offer fee waivers and exemptions based on account type, transaction history, or customer category. Understanding when and how these waivers apply can help you significantly reduce recurring service charges and manage your banking expenses more effectively.

For example, customers maintaining high average monthly balances in their savings or current accounts may be eligible for waived NEFT charges, IMPS fees, and even reduced RTGS fees on high-value fund transfers. Premium and salary account holders often benefit from bundled features such as free ATM withdrawals, cheque books, and debit card maintenance.

Senior citizens and pensioners are frequently granted exemptions from minimum balance requirements and certain transaction charges. Similarly, students and minor account holders are offered special zero-balance accounts with no service fees for basic banking operations.

Many banks offer relationship-based waivers, where customers with linked FDs, loans, or mutual fund holdings enjoy reduced charges across banking services. Institutions may also waive charges temporarily during promotional campaigns or for first-time users of digital banking services.

Fee waivers are also granted for specific payment methods. For instance, NEFT and RTGS transactions conducted through internet or mobile banking are often free, unlike those done via branch visits.

It’s essential to regularly review your account features, enrol in applicable waiver schemes, and avoid unnecessary service triggers such as cheque bounce or ECS failure. Leveraging these exemptions can make your banking experience more cost-effective while still maintaining access to full-service functionality.

Conclusion

Understanding the structure of service charges, including NEFT charges, RTGS fees, and IMPS fees, is essential for managing your financial transactions efficiently. While these charges are often nominal, they can accumulate over time, especially if customers are unaware of the conditions that trigger them. From basic banking activities to digital fund transfers and international payments, each service carries its own cost implications that should not be overlooked.

By staying informed about the different types of service fees, making use of digital platforms wisely, and choosing the most cost-effective transaction methods, individuals and businesses can significantly reduce their banking expenses. Moreover, banks often provide fee waivers and exemptions based on customer profiles, transaction history, and account types—benefits that should be actively explored and utilised.

Ultimately, responsible financial behaviour, timely updates on bank policies, and proactive use of digital tools can help you avoid unnecessary costs while maintaining seamless access to essential banking services.