For most people, their savings account is their primary mode for transacting with a financial institution, mostly with banks. This account serves as a place to park your extra cash and allows you to build a nest egg for your family. Although this account has a lot of significance in your investment portfolio, the sad fact is that it is the least researched financial instrument.
The following key factors will help you to choose the best savings account for your needs:
Interest rate. Savings accounts typically pay the lowest interest rates when compared to other investment avenues. Even after the RBI deregulated interest rates in 2011, most banks continue to offer low rates on savings accounts, at around 4%. While some private banks offer attractive rates of 6% or higher to lure customers, it is always better to go through the fine print before choosing any bank.
Minimum cash balance. Typically, public sector banks have nil or low minimum cash-balance norms for accounts (Rs. 500-1,000) while most private players would demand considerable minimum balance (Rs. 5,000-10,000 or more). It is advisable to go ahead with a bank that does not make you lock in a substantial amount in your account.
Presence or network of the bank/financial institution. The current generation is thriving on web-based applications, which have extended into the banking sector in the form of net-banking or mobile banking. But there are certain transactions that require you to visit the branch and it is advantageous to have a bank that has a widespread network with many branches.
Service charges / ancillary fees. Certain financial institutions charge you for ancillary services such as SMS alerts, duplicate ATM card/PIN number, and cheque-book after the minimum free quota (25-50 cheque leaves) for every financial year. Ensure that you are well aware of these charges at the time of opening a savings bank account. Having said that, a more transparent bank is better than one that appears low-cost, but could keep many costs hidden.
Debit-card deals. In order to differentiate from competitors, most banks offer deals on their debit cards which range from cash-back offers to insurance coverage. However, certain banks also levy annual fees on their debit cards while some waive this amount if annual transactions cross a minimum threshold limit. For instance, banks offer gold and platinum debit cards, which offer a host of benefits, but often cost a yearly fee.
Doorstep banking facilities. With the current scenario of hectic schedules and busy lifestyles, certain private banks offer doorstep services such as cash/cheque pickup, demand draft delivery, and documentation pickup. Banks have started offering doorstep cash collection for account deposits. Certain banks also deliver demand drafts at the requested location, but all these services come at a certain cost, which you should consider before you opt for an account with that bank. Certain banks have opened priority banking verticals, which have dedicated relationship managers catering to high-net-worth customers.
In a consumerist setup, it is always wise to analyse all factors before opening a bank account. This will help you to have an extensive, profitable, and transparent relationship with your bank in the long term.
Disclaimer: Copyright Kotak Mahindra Bank Ltd.
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