In today’s day and age, there are a plethora of options available to the investor to save money. The question is why should someone then bother to choose a savings account with a bank? Especially, when this money-saving avenue hardly let’s you collate funds due to the low percentage of interest it belts out over a period of time. There is a simple explanation: Savings bank accounts are easy to operate and very convenient and mostly cheaper to opt for than other substitutes for savings.
While investing in stocks or certificates of deposit usually requires maintenance of a higher minimum balance or have minimum transaction limits, opening a savings account is fuss-free and easiest method of setting aside a little more cash. By being prudent in your selection process, you can set aside a neat corpus at the end of every month or quarter, while actually saving for a snazzy car or to buy a home loan. It doesn’t hurt to earn a little interest on it.
Here’s how to find the one that will work for you. Identify your investment personality and goals before considering opening a savings bank account:
- How much amount are you willing to invest in a savings account? Most banks, apart from a few public-sector banks require a minimum balance to be maintained every month instead of a minimum quarterly balance earlier.
- Check how easy or difficult does the bank make it for you to get hold of your money. Accessibility is crucial and you must also check on the limit for withdrawals a month.
- Are you the investing personality who would end up saving money at the end of the month to earn interest on it?
- Lastly, confirm the kind of interest you may be able to earn on a savings bank account. Are you patient enough to earn through a low interest? If not, than you should opt for faster earning avenues like stocks, bonds or mutual funds.
The next logical step after you have figured out your investment personality would be to compare banks and find out where you are being offered the best deal. Even then, be careful of the too-good-to-be-true discounts being offered to lure customers.
Following are the secrets to cross-checking your choice of a savings account:
- Interest rates: This aspect is the first and the most important one you must have total information of. Check with various banks what kind of interest rates they offer on a savings bank account. The interest rates may range from 3-5% a month. If you are lucky to get hold of a simple and convenient savings account that does what you want, there would be nothing better.
- Minimum balance: A higher minimum balance offered by the bank basically a loan to the bank at a low interest. Many banks offer minimum balances as meagre as nothing such as The Oriental Bank of Commerce, The State Bank of India has recently waived off the minimum balance requirement to attract customers. While most private banks like ICICI demand a minimum balance of Rs. 10,000 a month. So be sure to look around before you go for the final call.
- Extra charges: Extra fees and surcharges which can eat into your savings from this investment avenue are maintenance and transaction charges on savings bank accounts. However, under certain cases, the fees may also be waived off in case your checking account is linked to your savings bank account of the same bank. You must read the fine print to check for any fee and charges related information and figure out how much impact it will levy on your banking.
- Online banking or net-banking: Today’s day and age makes this requirement a pre-requisite. It is noticed that net-banking is a bit cumbersome and difficult when opted at a public sector bank rather than a private one. But, apart from the local services in the branches, most of the banks offer online banking services. However, some may even charge more for doing anything other than keeping an account of your balance. If you are a master of net-banking, you pay through this facility most of the time and even make online fund transfers within and outside the bank, you must choose a bank which offers you a free online service. For instance, HDFC Bank or Central Bank of India has a net-banking service. The HDFC one only requires you to register with the branch to avail their online banking services.
Other pointers before you apply for a savings bank account:
- Check if the account is a fixed or variable account?
- Are transfers within the bank and from one bank to another permitted?
- Does the bank levy a restriction on the number of withdrawals?
Also, before choosing to opt for this slow but safe investment avenue, be clear if you really just want your money to sit there idle and grow or you intend to use it up subsequently. The utility of a savings bank account also depends upon the term of the investment objective; either it is short term or long term.
