For most of us, a savings bank account It is the primary method of transacting with a bank or financial institution, and is used for online shopping, among others. Savings bank accounts help us keep our money safe and are of great importance in our investment portfolio, yet are the least researched financial instrument. This excerpt will look at some of the factors that can help you choose the right savings account for all your needs.
Rate of interest: The interest rate offered on deposits is an important factor that needs to be checked while estimating the overall charges levied by Bank, It is always better to have a bank offering a competitively high rate of deposit. This is because a relatively higher interest rate can yield better returns, effectively beating the current inflation rate.
Gaurav Agarwal, Senior Director, Paisabazaar.com, says, “With the control of savings account interest rates, many private sector banks have offered interest rates of 5.5% and above for select account balance slabs. Such rates are public. The highest fixed deposit (FD) rates offered by the sector and most of the private banks. Note that banks can change their savings account interest at any time.
As per Section 80TTA of the IT Act, you get a deduction of maximum 10,000 on interest earned from savings account __irrespective of the number of such accounts operated by you.
Look for hidden charges: See ‘Schedule of Charges’ while opening Savings Accounts. Some savings account transactions are chargeable from the very first occurrence. Others have a predetermined free limit, beyond which they become chargeable. Savings account types with higher minimum balances usually offer more free transactions.
Raj Khosla, Founder & MD, MyMoneyMantra.com says, “One must look at the charges levied by various banks on a savings bank account, including annual fees, minimum deposit requirements, penalties for violating minimum deposit limits, transaction fees, charges Including ATM withdrawals after crossing the free withdrawal limit and transfer charges.”
Apart from this, you should also pay attention to your savings bank account limits as lenders set certain cash limits, transaction limits and caps on remittances.
Minimum Account Balance: Many free services and transactions may become chargeable for failing to maintain the minimum balance. So, it will help if you always opt for a savings account that can comfortably meet the minimum average balance requirements. Generally, public sector banks have zero or low minimum balance norms for accounts, while most private lenders may demand a much lower minimum balance.
Adil Shetty, CEO, BankBazaar.com says, “Most savings bank accounts have a minimum balance requirement. This means that on an average, the account should have a minimum prescribed amount. Depending on the bank and the type of account, it could be as little as 1,000 or higher 50,000 Not maintaining sufficient balance may result in penalty and charges levied by the bank. Banks also offer employed people a special salary account or zero balance account where the minimum balance requirement is waived, and the average balance can drop to zero. However, there may be a requirement for regular salary credits to such an account. So, you have to identify how much money you can deposit in a savings account and choose one accordingly.”
Customers should examine the cumulative services and exceptional privileges provided by the bank, and whether such benefits justify the increasing cost of maintaining a savings account.
branch network: Number of bank branches, nearest branch from your residence or office, number of off-site and on-site ATM kiosks, and facilities available at the nearest branch are some of the factors that can enhance your banking experience.
Agarwal says that the advent of mobile banking and internet banking has reduced the need to visit bank branches. But consumers may still need to visit their banks for services like locker operations, depositing or withdrawing cash in excess of the daily ATM limit, etc. “The reputation of a bank branch in providing quality and prompt customer service should also be taken into account. Further, since banks charge cash withdrawals from ATMs of other banks in excess of a free limit, a consumer needs to be able to withdraw cash at those locations of the bank. But one must also consider the penetration of ATMs where he frequently visits,” says Agarwal.
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Ultimately, spending behavior including your age, income stability, sources of income, categories of expenses, and frequency of spending are some of the factors you should choose your bank account based on. For example, some of you might be looking for the maximum benefits offered on a debit card. However, for others, debit cards are not of much use if the reach of PoS devices is extremely low, especially in remote locations.
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