The savings account is primarily designed for the purpose of encouraging people to save money. It allows the account holder to deposit money as per their convenience and on the other hand provides interest on deposits. Asavings account is a financial instrument that can be used to maximise the earning potential of an individual and minimise losses. Given below are some of the tips for choosing a savings account when the interest rates increase.
The bank nearest to your home seems like a convenient option for your banking needs. But it may not be the most profitable option to park your money when the savings account interest rate rises. The interest rates paid by banks on savings account vary from one bank to another. The lowest rate of interest offered by the banks is 3% and the highest interest rate offered by the banks on savings account is 6%.
In today’s competitive market, the banks can decide their own interest rate on savings account. Attractive interest rates on savings account help them to increase their customer base. This increases the market competition among banks. Consequently,you can earn more interest in the competitive market. You can opt for low-cost savings accounts and earn more interest on quarterly basis.
So, you need to compare the rates of interest offered by different banks and NBFCs before finalizing your bank. For comparing the interest rates, you can visit the website of any online aggregator and compare the rates. This will enable you to have an idea about the interest rates and the other facilities offered by the savings bank account of any particular financial institution.
Before finalizing your bank for opening a savings account, make sure to compare the rates of interest offered by various financial institutions. Different banks offer different rate of interest for the savings account. Compare the various savings account and their rates of interest online. Consider online banks that offer higher rates of interest than brick and mortar banks. This is because the online banks do not have many branches and cost less to operate as compared to the brick and mortar banks. They can pass some of their savings in the form of high interest rate.
Some customers may be concerned about the safety and security of online transactions and are sceptical about trusting online services. But it is important to know that they are as secure as the brick and mortar banks.
Use the online calculator to get a clearer idea of the interest rates and how much you can earn by keeping your money in any particular bank. The online calculator helps you to understand how the difference between the interest rates of online banks and traditional banks affects your quarterly yield.
SEE ALSO: Calculate Interest On Savings Account
If you want the convenience of both high interest rate and as well as having a branch nearby, then consider a co-operative bank or a post office savings account. The savings account is one of the basic facilities provided by every financial institution like banks, post office and NBFCs. A post office savings account offers customers with the facility of depositing money as well as withdrawing funds as and when required. The savings account can be transferred from one post office to the other across the nation. Currently, the post office savings account offers an interest rate of 4% on the savings account. However, these accounts are particularly helpful for individuals who have a transferable job and for senior citizens who want to avail banking facilities at a branch near their homes. Also, the co-operative banks offer an interest rate of 4% per annum on the daily balance in the account. Co-operative banks are the best options for people living in rural, urban and semi-urban areas and they aim to encourage the people to save and establish funds, especially the economically backward members of the society. Nowadays, many co-operative banks and post office provides the debit card facility. These banks have government sovereignty and are one of the best options to park money as they offer better interest rates on the savings accounts than many banks.
Some banks increase the rates of interest for a short period of time to lure customers but then decrease the rates after a few months. This is known as the teaser rate.The deposit rates on savings account keep changing based on RBI’s revision of policy rates. However, the rates do not change overnight. This is why it is important for the depositor to carefully check the competitive rates offered by the bank. Make sure the bank has a good market reputation and is not offering a teaser rate which can quickly go down. Carefully analyzing these aspects will enable you to understand how much interest you will earn on your deposits in the long run.
Keep your money liquid when interest rate begins to rise. Parking your surplus cash in the savings account gives you the flexibility that a fixed deposit doesn’t. A fixed deposit provides you higher interest rate than a savings account but it requires you to lock in your money for a specific time period. This is not helpful in a rising interest rate environment. Many short-term fixed deposits have the same rates as top paying savings accounts. So, if an individual has the option of buying a one year fixed deposit and keeping money in savings at the same interest rate then the latter is a better option as the depositor has the required liquidity.Keep in mind, withdrawing money from the fixed deposit before maturity attracts penalty.
SEE ALSO: What is a Savings Bank Account?
Not every financial institution offers the same terms and conditions for opening a savings account. Some banks let you open accounts at minimum balance while others may require a specified deposit amount to open a savings account. Like post office savings account can be opened with a minimum amount of Rs. 20. You may also need to keep a certain amount of money in your account to earn interest. Also, some of the banks charge a service fee if you do not keep minimum balance in your account.
There are many banks that offer competitive rates of interest for the savings account. But there are hidden charges that require detailed speculation. Make a list of the banks and compare and select the one that suits your needs. Carefully go through the charges and make sure you understand what fees your bank charges and how much you need to keep in the account to get the rate you want.
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