The smart way to choose a savings account
For most of us, a savings bank account is the primary mode of transaction with a bank or financial institution, and is used for online purchases, among other things. Savings bank accounts help us protect our money and are of great importance in our investment portfolio, but they are the least studied financial instrument. This article will look at some of the factors that can help you wisely choose the right savings account for all your needs.
Interest rate: The interest rate offered on deposits is an important factor to check when evaluating the overall fees charged by the bank. A bank offering a competitive higher rate on deposits is always preferable. This is because a relatively higher interest rate can fetch better returns, thus beating the persistent rate of inflation.
Gaurav Aggarwal, Senior Director of Paisabazaar.com, says: “The deregulation of savings account interest rates has led many private sector banks to offer interest rates of 5.5% per annum and above for certain portions of account balance. These rates are even higher than the highest fixed deposit (FD) rates offered by the public sector and most private banks.” Note that banks can change the interest on their savings account at any time.
In accordance with article 80TTA of the computer law, you benefit from a maximum deduction of ₹10,000 on interest generated by savings account __ regardless of how many of these accounts you manage.
Look for hidden fees: Go through the “fee schedule” when opening savings accounts. Some savings account transactions pay off on the first incident. Others have a predetermined free limit, beyond which they become chargeable. Savings account types with higher minimum balance requirements generally offer more free transactions.
Raj Khosla, Founder and MD, MyMoneyMantra.com says, “One should look at the fees that various banks charge a savings bank account, including annual fees, minimum deposit requirements, penalties for exceeding minimum deposit thresholds, transaction fees, charges on ATM withdrawals after crossing the free withdrawal limit and fees associated with transfers. »
Besides, you should also pay attention to the limits of your savings bank account, as lenders prescribe certain cash limits, transaction limits, and caps on remittances.
Minimum account balance: Many free services and transactions can become chargeable if the minimum balance is not met. Therefore, it would be helpful if you always opt for a savings account whose minimum average balance requirements can be easily met. Generally, public sector banks have zero or low minimum balance standards for accounts, while most private lenders may require a considerable minimum balance.
Adhil Shetty, CEO of BankBazaar.com, says, “Most savings bank accounts have a minimum balance requirement. This means that on average the account must contain a set minimum amount. Depending on the bank and type of account, this can be as low as ₹1,000 or up to ₹50,000. Failure to maintain a sufficient balance may result in penalties and charges by the bank. Banks also offer a special salary account or zero balance account to employees where the minimum balance requirement is waived, and the average balance can drop to zero. However, such an account may require regular salary deposits. So you need to identify how much money you can put in the savings account and select one accordingly.”
Customers should check the cumulative services and exceptional privileges provided by the bank, and whether these advantages justify the additional costs of managing the savings account.
Branch network: The number of bank branches, the branch closest to your residence or office, the number of offsite and onsite ATMs, and the facilities available at the nearest branch are factors that can improve your banking experience.
Aggarwal says the advent of mobile banking and internet banking has reduced the requirement to visit bank branches. But consumers may still need to visit their bank for services like operating lockers, making deposits or withdrawing money beyond daily ATM limits, and more. Additionally, since banks charge cash withdrawals made from other bank ATMs above a free limit, a consumer should also consider the bank’s ATM penetration in locations that he visits frequently,” says Aggarwal.
Ultimately, your age, income stability, sources of income, spending categories, and spending behavior including spending frequency are some of the factors on which you should choose your Bank account. For example, some of you would be looking for the maximum benefits offered on debit cards. However, for others, debit cards are not very useful if PoS device penetration is extremely low, especially in remote locations.