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Don’t sign up for savings bank account based on just interest rate


Banks slot savings accounts into different tiers based on several criteria, including minimum balance, operational details, and services required. A bank could have an savings account targeting children, women, seniors, salaried, business owners, high-income earners, and so on. Depending on the category, banks provide different benefits and privileges to account owners.

Different types of accounts

Take three different savings accounts from HDFC Bank as examples. Its ‘SavingsMax Account’ offers an automatic sweep-in facility for customers to earn higher interest rates. Among other features, it comes with a platinum debit card, accident hospitalisation cover of 1 lakh and unlimited cash withdrawals at ATMs, according to the website. The average monthly balance for the account is Rs25,000.

The bank’s ‘Women’s Savings Account’ comes with EasyShop Woman’s debit card, Rs1 cashback on every Rs200 spent and a 2% lower interest rate on a two-wheeler loan, among other benefits. Customers must maintain an average monthly balance of 10,000 for metro and urban branches and Rs5,000 for semi-urban and rural branches.

The ‘Basic Savings Bank Deposit Account’ comes with a Rupay debit card, allows four free cash withdrawals each month, and customers don’t need to maintain an average monthly balance.

Savings account is not an investment tool

There are a few things to keep in mind when you choose a savings account. “The first and most important one is that the savings account is not an investment tool. Use it only to keep surplus funds until they are invested and also to keep emergency funds for easy access,” said Adhil Shetty, CEO, Bankbazaar.com, a marketplace for financial products.

Don’t keep large sums in your savings account, and the interest should not be your primary consideration for selecting an savings account. If you keep a balance of 10 lakh in a savings account offering 3% interest and another one providing 2.5%, the difference in the return will be 5,104 at the end of the year.

The interest, hence, should not be a consideration unless there is a significant difference. What matters more are the facilities the account provides and the associated charges.

Be mindful of the average monthly balance

The second parameter to choose an savings account is the average monthly balance requirement. It can be as low as zero or as high as Rs1 lakh (or more in some cases), depending on the bank and the account type.

Not maintaining sufficient balance can lead to penalties and charges. Banks also offer special salary accounts or zero-balance accounts where they waive off the minimum balance requirement. However, such accounts may require regular salary deposits.

One of the factors in deciding on the savings account is the amount of money you are willing to park with the bank. The higher the funds you maintain in the account, or in fixed deposits, the more benefits and facilities the bank will offer you.

Service is most important

Choose a savings account based on the service. “Several banks have privilege accounts that allow account holders a range of benefits. There’s no restriction on the number of cash withdrawal transactions, discounts on bank locker facilities, priority service, a personal banker, and so on. Such service, facilities and privileges may not be available with a vanilla SB account or may come with higher service charges. However, these come at the cost of having to maintain a high average monthly or quarterly balance in the account,” said Shetty.

The savings account is a long-term relationship with your bank. You should be able to manage your account with minimal difficulties. For instance, in the ongoing pandemic, you may prefer a bank that arranges a pick-up of your documents instead of asking you to visit its branch, which may be crowded.

You must opt for a savings account based on the services a bank offers for the average monthly balance you maintain with it.

(Do you have personal finance queries? Send them to [email protected] and get them answered by industry experts)

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