Difference Between Salary Account and Savings Account

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Salary account vs savings account – Find out which one suits your needs.

Key Takeaways

• Salary and Savings Accounts operate similarly but have some differences.
• Employers open Salary Accounts for employees, while Savings Accounts must be opened individually.
• Salary Accounts allow zero-balance maintenance, but Savings Accounts require a minimum balance.
• Non-operational
Salary Accounts automatically become Savings Accounts.
• Salary Accounts are for individuals, while Savings Accounts can be joint accounts.

Introduction

Most of us manage two types of financial accounts - a Salary Account and a Savings Account. It's like having two wallets - one for daily expenses and another for saving towards future goals. Typically, both accounts offer basic features like debit card and online banking, yet they serve distinct purposes.

A Salary Account acts like your primary wallet, receiving your paycheck and facilitating day-to-day transactions. A Savings Account, on the other hand, operates like a secure vault designed to accumulate funds and potentially earn interest for plans.

This article will explore the differences between Salary Accounts and Savings Accounts, helping you understand which suits your financial needs best.

What is a Salary Account?

A Salary Account is one opened by an employer to credit your salary. Typically, when you join an organisation, your employer provides you with a new account in which your salary, bonuses, and financial incentives are credited each month. This account is also known as a zero-balance account because you are not required to maintain a minimum balance.

Benefits of a Salary Account:

• Employers use Salary Accounts for direct and timely salary payments.
• Salary Account holders benefit from reduced transaction fees, waived or discounted account maintenance charges, and lower loan rates.
• Salary Account holders get exclusive offers on financial products like credit cards, loans, and insurance.
• Salary Accounts allow automatic bill payments for timely settlements.
• Some Salary Accounts include savings or investment options.
• Certain Salary Accounts offer tax benefits and serve as income tax documentation.

What is a Savings Account?

A Savings Account is a standard account offered by banks where you can deposit your savings. It's often the first account people open to handle their finances and store their savings securely. There are various types of Savings Accounts available, including basic Savings Accounts, premium accounts, and online Savings Accounts. Banks usually require you to maintain a minimum balance in this account as specified by their terms. Additionally, the money you deposit in a Savings Account earns interest over time, helping your savings grow passively.

• Your money is secure in a Savings Account, and you can access it anytime.
• Savings Accounts offer slow but steady interest growth.
• Use a Savings Account to build emergency funds and reach your financial goals.
• A good savings balance can help you get credit and loans.
• Automate bill payments to save time.
• Savings Account statements simplify calculating and filing income taxes.

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Understanding the Difference Between Salary Accounts and Savings Accounts

Let us now take a closer look at the differences between Salary Accounts and Savings Accounts:

Purpose

Both Savings and Salary Accounts serve different purposes. A Savings Account helps you manage your finances by holding or parking money. A Salary Account is used as a means by your employer to credit your salaries.

Interest Rates

Both Salary and Savings accounts earn interest, often at similar rates in most banks. However, many banks offer various types of Salary and Savings accounts to better meet customers' needs. Interest rates can vary between banks and even among different types of accounts within the same bank.

Minimum balance

Salary accounts do not have the requirement to maintain a minimum balance; this is why they are also referred to as zero balance accounts. On the other hand, banks require you to maintain a specific minimum balance in your savings accounts. Failure to maintain the adequate minimum balance may attract penalties.

Conversion

If there are no transactions in your Salary Account for whatever reason for three consecutive months, the account gets converted into a Savings Account. You will then have to comply with the minimum balance requirement associated with Savings Accounts. On the other hand, a Savings Account does not convert due to inactivity. However, suppose you wish to convert your Savings Account to a Salary Account. In that case, it can be done, provided your new employer has an existing banking relationship with the same bank with which you have your Savings Account.

Account opening

A salary account can be opened only by an employer or a corporation. You cannot typically choose your preferred bank for this account, as it is offered under a tie-up between your employer and the bank. Also, your employer will open only one salary account for you. A savings account is a personal account that that allows you to manage your finances. You can open a savings account with any bank if you prefer and have multiple savings accounts as well.

Account holding

A Salary Account is usually an individual account, i.e., you cannot open it jointly with another person, and you are the chief signatory of this account. However, when it comes to Savings Accounts, you can open them jointly with other people – spouse, parents, or children.

Eligibility

To open a Salary Account and enjoy its benefits, you must be employed with an organisation. However, there are no specific eligibility requirements for opening a Savings Account. Anyone with the necessary documents, such as an Aadhaar and PAN card, can open a Savings Account.

Similar Features of Salary Accounts and Savings Accounts

Despite the difference between Salary Accounts and Savings Accounts, we can find many similarities between them. These include:

• Both accounts have quick and easy processes for opening.
• The passbook issuing and printing processes are the same.
• Both accounts support NEFT/RTGS/IMPS payment.
• Both accounts notify you of your transactions via SMS alerts.
• You get phone banking and net banking facilities with both accounts.
• There are 24x7 services for both accounts in case of any issues.
• There are no charges for debit card ATM usage for both account holders.
• The tax implications for both accounts are the same.
• You can set up automated bill payments for both accounts.
• Both account holders are entitled to a credit card

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Should You Have Both a Salary and a Savings Account?

Many people typically maintain both a Salary Account and a Savings Account. The Salary Account is where they receive their income, while the Savings Account is primarily used for storing money and handling daily expenses. Depending on personal preference, a salaried worker may hold these accounts with the same bank or opt for different banks.

It's essential to carefully compare interest rates and other features various banks offer before deciding where to open your accounts. This ensures you choose a bank that best suits your financial needs and goals.

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• Visit our website’s Open Savings Account page or use our mobile app to start opening your account instantly.
• Have your PAN and Aadhaar cards ready for a smooth online onboarding experience.
• Speed up your account opening by doing Video-KYC using your smartphone or computer with a camera and video calling.

After verifying your KYC details, DBS Bank will open your account at the earliest.

Take Away

Although the two accounts may look similar, there are several notable differences to help you decide which suits you the best. If you are already employed, your salary may be credited directly into your Salary Account. Even so, it is better to open a Savings Account as well, since it enables you to park your savings, create Fixed Deposits, earn reward points and cashback, and more.

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Frequently Asked Question

1. Is it necessary to provide proof of employment to open a premium Salary Account?

   Yes, you must provide employment confirmation to open a premium Salary Account. This is required to verify your employment status with the company.

2. If I switch companies, can I continue using my current Salary Account?

   Yes, you can continue using your current Salary Account if your new company has a tie-up with the bank where you have the account. You'll need to provide your account details to your new employer to continue using it.

3. Can I deposit cash in my Salary Account?

   Yes, you can deposit cash in your Salary Account. However, going over the monthly limit for in-person transactions may incur small fees.

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