TomorrowMakers

Here’s what you need to know about savings accounts before you open one.

9 Important things to keep in mind before you open a savings bank account

As compared to 2011, India’s banked population doubled to reach 80% by 2017. Incidentally, in 2014-15, more than 7 crore women were added to the banking system in India. A savings bank account is extremely useful as it enables one to withdraw funds anytime, enables zero balance in some cases, and even offers a nominal interest.

Therefore, you can use it to receive your salary, run your household, buy gifts for special people in your life, pay your children’s tuition fees, withdraw funds regularly to invest, and several other activities.

A savings account can be opened and operated by an individual either singly or jointly. This is by far the simplest and the most popular service offered by banks. The procedure for opening a bank account is simple. Documents required for opening an account include age proof, identity proof, address proof, photographs, etc.

Yet sometimes we open a savings account without understanding the pros and cons. This is because we assume that savings accounts offered by all banks are the same. However, one must check some important features before deciding on the bank where you want to open the account. You need to have clarity on the purpose of opening a savings account and the facilities you wish to use.

The selection of the bank should be based on certain objectives. Let’s consider some important things to check before opening a savings account:

1. Opening deposit

Banks may require you to make a deposit while opening your savings account. This is to cover costs that are associated with setting up the new account and then maintaining it thereafter. Sometimes, too high a demand can compel you to look at other banks.

2. Minimum monthly balance

Some banks mandate a requirement of maintaining a minimum monthly balance or deposit every month. If you fail to do so, your interest rate can be lowered. And in return, the bank would offer you a higher fixed deposit return. So, if you want to avail of this benefit, you could consider setting up an automatic deposit into the account. If the benefit is of no value to you, you should go for a zero-balance account.

Related: Tips to help you decide how much cash to keep in your bank account

3. Additional services offered 

You need to check if the bank offers some basic services, such as debit card, cheque book, netbanking, phone banking, etc. These facilities have assumed a lot of importance in this networked age. Customers will want to use these facilities without being overly dependent on bank staff.

4. Upper limit on monthly withdrawals

Some savings accounts have an upper limit on the number of withdrawals you can make on a monthly basis. If you need to make frequent withdrawals, it is better to choose a savings account that allows you to do so without any penalties.

5. ATM facility

Savings accounts offer an ATM facility that is used by everyone. However, some savings accounts have a cap on the amount you can withdraw and the number of times you can use the ATM for free. So, if you intend to withdraw money regularly, you need to find a savings account that offers good ATM facilities and low transaction fees while using other banks’ ATMs.

6. Miscellaneous fees

A savings account may come with various fees such as on ATM withdrawal, minimum deposit, cash withdrawal from a non-home branch, etc. It is essential to go through all the fees listed by the bank.

7. Credit facility 

It is important to check how easy it would be to avail of credit from the bank. If you intend to take a loan from a bank in the near future, you need to look out for a bank that offers loans at low rates of interest.

8. Auto-sweep facility

Due to various responsibilities, you might not be able to put in conscious efforts to save or invest money. There could be instances when you have extra funds in your savings account, and you might be tempted to spend it. Thankfully, most banks offer a useful facility known as auto-sweep. The auto-sweep feature links your savings bank account to your fixed deposit account and a specific limit is defined. If the funds in your account exceed that limit, the excess amount is automatically transferred into the fixed deposit. This way, you can earn more interest on the excess amount. Over time, this can evolve into a healthy corpus.

9. Online services

You need to look for a bank that allows customers to access their savings accounts online. These days, internet banking, mobile banking through an app, and interfacing with other payment apps for bill payments is very important. So check if your bank charges a fee for online transactions. You should also check if you can easily transfer money through online channels.

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