How to Choose the Best Savings Account for Your Needs

Savings accounts are an integral part of our lives today. They are useful when you need to meet immediate and short-term needs, such as paying bills or making a down payment for a loan. 

There are various types of savings accounts you can choose from. The interest rates offered, the services provided and the associated costs in a savings account vary depending on the bank. It is therefore crucial to review the options available before opening a savings account. What are a few things to consider before opening a new savings account? Let’s find out.

Interest rate

A savings account's interest rate varies from bank to bank. Similarly, there is variation in the interest credit frequency. Some banks, such as IDFC FIRST Bank, credit the savings account interest monthly, whereas others do so on a half-yearly or quarterly basis. With the power of compounding, a monthly credit will result in more interest income over time. That accelerates the growth of your savings.

Therefore, even among the banks that offer the same interest rate, it is a good idea to evaluate the annual percentage yield (APY) to know which bank offers effectively higher interest. For example: at a 6% annual rate of interest, the APY would be 6.17% if interest is credited monthly and 6.09% if it is credited half-yearly. It will greatly impact the growth of your savings in the long run. 

With a 6% half-yearly compounding, one lakh rupees will grow to Rs. 1,80,611 in ten years, whereas with monthly compounding, it will grow to Rs. 1,81,940 during the same period. So, it is best to compare the interest rate offered and the frequency of credit to maximise your interest income.

Fees charged by the bank 

A bank provides you services like debit cards, demand draft/ pay orders, electronic fund transfers, etc., with your savings account. The fees charged for these services by banks vary drastically. For example, IDFC FIRST Bank provides 28 commonly-used banking services to its savings account holders for free, provided they maintain the average minimum balance requirement of their account. 

Meanwhile, other banks may even charge you for services like issuing debit cards, SMS alerts, or the return of a cheque or electronic mandate. The charges levied by the bank ultimately impact your net earnings. Thus, it is vital to carefully understand the fees before selecting a savings option for a new account opening. 

Minimum balance requirement

Besides a few no-frills savings accounts, such as those opened under the Jan Dhan Yojana, you must maintain a minimum balance in your savings accounts. Those who fail to maintain the minimum balance are charged a fee. Therefore, when choosing the best bank for a savings account, consider your requirements and financial ability to maintain the required minimum balance.

Accessibility

It is a good practice to monitor the balance in your savings bank account regularly, especially if you have the mandate to pay utility bills, EMIs and SIPs. The ease with which you can access your bank account should be a key consideration when choosing a bank for instant account opening. 

If you need to frequently access your bank account for reviewing transactions or carrying out online payments, consider a bank offering easy online access through internet banking and a mobile app. Facilities like account alerts, notifications, and budgeting tools can come in handy.  

Features of debit cards

The debit card with your savings account helps carry out various transactions online and offline. The fee charged for a debit card differs from bank to bank. Banks may charge annual and ATM withdrawal fees beyond a certain number of transactions. So, consider these aspects before opening a savings account.

Moreover, the acceptability of the debit card issued by banks differs significantly. With some debit cards, you can avail of discounts and cashback from certain merchants, especially during festive seasons. That helps you reduce your final purchase cost. Debit cards also differ in terms of security features; higher security is critical to avoid fraud on your debit card. A bank that extensively uses technology will offer enhanced security features to its customers and thus, insulate them against fraud. 

Before deciding where to park your money, you must carefully evaluate the above features offered by various banks on their savings accounts. IDFC FIRST Bank's savings account offers you 28 commonly-used services for free, while offering a higher-than-average interest rate. Click here to open your savings account with IDFC FIRST Bank for a hassle-free banking experience.

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