What Are the Features of Savings Account?

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Ever wondered what makes a Savings Account tick? In this blog, we'll take you through the key features of Savings Accounts, breaking down everything from interest rates to accessibility. Whether you're already a saver or just getting started, you'll find out how these accounts can help you manage your money and grow your wealth effortlessly.

Key Takeaways

• Savings Accounts offer a variety of features and benefits.
• You can initiate quick transactions via internet and mobile banking, and an ATM-cum-debit card.
• Banks also provide interest on savings parked in the account.
• You have to maintain the required minimum balances stated by your bank.

Imagine having a safe place for your money that also helps it grow. Whether you're setting aside funds for a rainy day, a dream vacation, or a major life goal, Savings Accounts are designed to make your money work for you. With attractive interest rates, easy access, and top-notch security, you can watch your savings flourish while you live your best life. What is a Savings Account?

A Savings Account is a deposit account offered by banks that allows you to store your money while earning interest. The main goal is to encourage saving by providing a secure and accessible place for your funds.

In India, savings accounts are the most common type of bank account, offering easy deposit and withdrawal options. They provide liquidity, enabling you to access your money anytime via ATMs, and they pay interest on your balance. Additionally, you can transfer money online and choose from different types of Savings Accounts to suit your needs. In this article, we'll explore the various features of a Savings Account besides its importance and benefits.

What is the Importance of a Savings Account?

The importance of a Savings Account can be understood with the help of a few pointers:

1. Safe Place for Funds

   A Savings Account is a secure place for your money, offering easy access whenever you need it. While it typically earns a lower interest rate, its liquidity allows for withdrawals up to a certain limit each month.

2. Interest Earning Account

   Unlike a current account, a Savings Account earns interest on your balance, helping to boost your income. Some banks offer higher interest rates for maintaining larger balances, and others provide a sweep-in facility, which automatically transfers excess funds to a fixed deposit to earn even more interest.

3. Low-Risk Option

   When considering investments, maximizing gains is often the goal. However, most investments come with some risk. A Savings Account stands out as a low-risk option that still offers profit. Unlike market-linked investments, a Savings Account provides steady interest without the worry of market fluctuations. Simply make a single deposit or regular contributions, and watch your money grow steadily and securely.

4. Tax Benefits

   Interest earned from investments is generally taxable, and Savings Accounts are no exception. The interest is added to your "Income from Other Sources" and taxed based on your income slab. However, under Section 80TTA of the Income Tax Act, 1961, you can claim a tax exemption of up to Rs 10,000 on Savings Account interest. This means only the interest above Rs. 10,000 is taxed annually. If you seek a tax break, a Savings Account can be a beneficial option.

What are the Features of a Savings Bank Account?

Below are some of the classic features of a Savings Account:

1. Quick & easy financial transactions

   As pointed out initially, the main purpose of having a Savings Account is to manage your earnings, i.e. sending and receiving money. Your Savings Account serves as a base for all financial transactions and cuts down your dependency on cash. These transactions can be done quickly and easily via banking services like net banking (NEFT/RTGS/IMPS facilities), ATM-cum-debit card, cheque or even a cash withdrawal slip. Additionally, for bill payments, banks are now offering dedicated payment facilities that allow customers to set standing instructions for paying utility bills like electricity, water, phone, etc.

2. Interest earnings

   Every Savings Account in India offers an interest rate ranging from 3 to 7 per cent. This rate varies from bank to bank and often depends on the decision of the Reserve Bank of India on repo and reverse repo rates. The interest earnings allow customers to earn some money on their deposits and gradually grow their savings.

3. ATM and Debit Card facility

   Banks give every Savings Account holder an ATM/Debit Card. This card can be used to withdraw cash from ATMs, make payments at retail stores, and even initiate online payments via a payment gateway.

   While withdrawing cash, you can either find an ATM branch of your bank or even access your account from another bank ATM if you need funds urgently.

4. Passbook and cheque facility

   Every Savings Bank Account comes with a passbook and cheque facility. A passbook is your account statement listing all your transactions, and a cheque is a written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer or account holder.

5. Net Banking and Mobile Banking

   As the usage of passbooks and cheques is reducing, the significance of net banking and mobile banking is simultaneously increasing. Every bank provides net banking and/or mobile banking facilities with your Savings Account if you opt for it. These internet banking facilities empower you to send and receive payments by simply logging in to your account online.

   Mobile Banking makes your experience even smoother as you can download the mobile application of your bank on your phone and access your account anytime. You can use this app for almost every service related to your Savings Account, including sending & receiving payments, viewing account statements, raising a complaint, and more.

   

   

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6. Minimum Average Balance

   While you can opt for a ‘zero minimum balance Savings Account’ offered by many banks these days, most Regular Savings Accounts require holders to maintain a minimum average balance. Failing to maintain the balance subjects the holder to a penalty. The minimum average balance and the penalty differ across banks.

7. Account type

   Since there is a considerable demand for Savings Account among the public, banks offer different types of Savings Accounts to assist their customers with unique needs and requirements. Such Savings Accounts include Regular Savings Accounts, Salary Accounts, Kids Savings Accounts, Women’s Savings Accounts, Senior Citizens Savings Accounts, Premium Savings Accounts, and more. You can also choose from various types of zero-balance accounts (besides the salary account) launched by the central government from time to time. For instance – the Pradhan Mantri Jan Dhan Yojana is a zero-balance account launched by the government. You can open this account at almost all banks in India.

Savings Accounts Benefits

Now that we've explored the features of a Savings Account, let's delve into its numerous benefits. From offering liquidity to ensuring the safety of your funds, a Savings Account provides a host of advantages -

• Fund transfers via a Savings Account are super quick, convenient, and straightforward.
• Facility to open accounts jointly
• Lower MAB (Minimum Account Balance) and no caps on deposits
• Instant account opening
• Intuitive platforms
• Competitive interest rates
• Nomination facility
• You can use a Savings account for auto-debit instructions related to bill payments or investments.
• Additional benefits like a free Demat Account, free-locker facility, etc., might also be offered.

From safekeeping of surplus money that can be used any time in the future to a base for carrying all kinds of financial transactions, different customers use Savings Account for various reasons. Almost everyone needs a Savings Account at some point in their life. If you do not own one yet, open a Savings Account online today and start saving. And if you already own one, you can explore other lucrative investment options like Fixed Deposit, Recurring Deposit, and Mutual Funds to better plan and grow your finances.

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Frequently Asked Questions

1. How do you earn interest in a Savings Account?

   You earn interest in a Savings Account by depositing money, which the bank then uses for lending and other investments. The bank pays you interest as a reward for keeping your money with them. The interest rate is typically a percentage of your account balance, calculated daily and paid monthly or quarterly. This interest helps your savings grow over time without any effort on your part.

2. Which bank gives 7% interest on Savings Accounts?

   In a Savings Account, the amount of interest you earn depends on several factors, primarily the interest rate set by the bank. This rate can vary among banks and may also differ based on the type of Savings Account and the balance maintained. For example, DBS Bank gives 7% interest on a Savings Account with a balance above Rs. 4 lakhs and up to Rs. 5 lakhs.

3. How much interest will I earn monthly for Rs. 1 lakh?

   The monthly interest earned on Rs. 1 lakh in a Savings Account depends on the interest rate offered by the bank. For example, if the interest rate is 7% per annum, the monthly interest would be:
   Interest = 1,00,000 x7%/12 = 583.33

   So, you would earn approximately Rs. 583.33 monthly.

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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.