Which kind of savings account do you have?

There are different kinds of savings accounts, all serving different purposes. We decode the different types.

Saving money is the first step towards financial independence. We often hear of people falling on hard times and not having a financial nest egg to bail them out. On the other hand, there are some who seem comfortably off even during phases of economic slowdown. A little digging later, you discover that this second batch of people probably had hefty savings in the bank, as well as investments that they could fall back on.

Saving money is not about hoarding cash at home. In fact, the nationwide demonetisation exercise of November 2016 proved just how disastrous this plan can be! There are just two ways to create robust savings:

· Save money every month

· Have an excellent savings account to deposit savings, extra earnings and spare cash in[1]

You probably have a savings account where you deposit your monthly savings (if you don’t, now is the time to get one!) It may be a normal savings account, probably with a minimum balance stipulation. But did you know that there are different kinds of saving accounts?[2] And that you can choose the best one as per your financial requirement?

* Regular savings bank account. All banks offer this type of savings account. It is either a joint or individual account that offers a free ATM debit card, a pass book and/or cheque book, and Internet access to perform net banking transactions. You also get access to the bank’s full range of products and services, and you can download the There are also many additional services, but the most important factor is that this account has a minimum balance stipulation. Your account attracts a penalty if it goes below 75% of the minimum balance. For example, if the minimum balance is Rs 5,000, you will be penalised for the account dipping below Rs 3,750 in a month. You earn a savings rate interest ranging between 4% and 7%, depending on the bank, from Bank of Baroda and HDFC (4%) to Yes Bank and Kotak Mahindra (6%) right up to DBS (7%).

* Zero balance savings account. As the name suggests, you do not need to maintain a minimum balance in this account. It is a good alternative for those who wish to operate the account more as a monthly checking account rather than a savings account[3]. Some banks allow zero balance accounts on salary accounts only, while some others like DBS Bank let you convert from normal to zero balance accounts without additional charges. The zero balance savings account may differ little from their other counterparts. Some Indian banks offer a high interest on savings account of this category too — DBS Bank offers 7% interest rates whether you have a normal savings account or a zero balance account[4]. However, if you maintain a high account balance every month, the bank would deem it fit to convert it into a regular savings account. You can check your bank’s policy on the maximum account balances permissible in this account.

* Salary account. These are savings cum current accounts set up by the company that you work for. The monthly income is deposited in this account. It may be a zero balance account while you are still employed with the firm. If you choose to continue using the account even after leaving the employment, the account may be converted into a minimum balance savings account.

* Senior citizens’ savings account. These are accounts designed for use by customers aged 60 years and above. They often have a higher rate of interest on deposits. The bank may also not insist on minimum account balances and special rates on fixed deposits and recurring deposits. Leading banks like Bank of India, ICICI Bank and IDBI Bank offer senior citizens’ accounts.

* Accounts for minors. These are joint savings accounts operated on behalf of minors by their parents or guardians. The account normally has one adult and the other a minor as the primary account holders. The minor can opt to have the account changed into a normal savings account when they attain the age of 18 years, and take full charge of transacting it by themselves. These accounts are normally useful for accruing money for future education, wedding expenses, overseas travel, etc.

* Women’s savings accounts. In a bid to encourage women to take charge of their finances, several banks in the country like HDFC and Axis Bank offer special women’s savings accounts that pay a higher rate of interest on deposits. These accounts might also have complimentary personal insurance coverage and some other incentives to open the account.

* NRE/NRO Accounts. These are accounts meant to facilitate the transfer of overseas monies to India by NRI account holders, or to hold Indian earnings in an Indian bank account owned by an NRI.[5] Some of the best NRI savings accounts are offered by top tier banks like DBS.

* PMJDY accounts. These are the newest kinds of savings accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY). These accounts were primarily launched in 2014 to bring the previously unbanked populations into the ambit of mainstream banking. There is a Rupay debit card on signing up, with zero balance stipulation, life insurance coverage and accidental insurance coverage.

[1] https://www.creditmantri.com/indian-bank-savings-account/

[2] https://www.paisabazaar.com/savings-account/articles/5324-types-of-savings-bank-accounts/

[3] https://www.bankbazaar.com/savings-account/zero-balance-saving-account.html

[4] https://www.dbs.com/in/treasures/deposits/earn-upto-seven-percent-on-your-savings-account.page?pid=IN_treasures_home_hero_SavingAccount_tab_161215

[5] https://www.dbs.com/in/treasures/deposits/earn-upto-seven-percent-on-your-savings-account.page?pid=in_tr_nri_interestrate_promo_230616?pid=in_tr_nri_interestrate_promo_230616