The Savings Account is the alpha of all relationships a common man can have with a bank. And banks do what they do best. Accept deposits, lend money, pay and charge interest and make a profit in the difference. It would be difficult for a bank to deliver on all its other financial services if accepting deposits is not the No: 1 priority. In reality, this Account is the sacred cow of the bank and warrants the account holder to treat it with sanctity as it is the origin of all his dealings with banks and financial institutions.
If the purpose of the savings account was to just ‘save’, today the humble savings account would not have proved to become inevitable for every individual. Why has the plain vanilla savings account reached such high levels of importance?
- All income is credited to a bank account: With the formulation of monetary policies, and the increased need to monitor the movement of money, tracking individual income became necessary. All income earned legally is credited to the savings bank account of an individual. Salaries, pension, and payments received from customers and clients are all credited to the bank account of the individual. Apart from very small entrepreneurs almost every small and big enterprise credits salaries and payments to the savings account of the individual.
- The Savings Account is a financial pedigree: The maintenance of a savings account speaks volumes about an individual’s financial position. The balance maintained, the cheque bounces, the frequency of transaction, the credits and debits in the account, the monthly inflow and outflow of cash, and the number of years the individual has been holding the account, interprets the profile of the customer to a financial institution. Most importantly, the savings account history talks about the credibility of the individual. A good savings account balance and history is a deciding factor when it comes to the sanctioning of a loan.
- Proof of income: Your savings account also serves as your proof of income. Did you know that salary credit or credits in the account are the only acceptable proof that government and non-governmental authorities recognize to validate that you are an earning individual?
- Liquid and on-demand: The cash in your account is the most liquid and legal form of cash one can hold. The balance also attracts a nominal interest and the interest is compounded on a half-yearly basis.
- All government benefits are credited to a bank account: Monetary benefits from the government are also credited only the savings account of the individual. Like the LPG subsidy.
- Income Tax: The government is able to track your tax liability only with the accounts you hold.
Quickies you should know about the Savings account
- An Indian resident with an Id and address proof and with a minimum deposit as stated by the bank, can open a savings account. (Some banks insist on an introduction letter, or a copy of your income statement).
- One account can be operated singly (by one person only) jointly (by two or more people) by the karta (Head of an HUF, provided the family is not engaged in any business activity).
- Every bank has a minimum balance to be maintained. Some banks insist on an average quarterly balance to be maintained.
- There can also be a penalty for the non-maintenance of minimum balance.
- Charges on cheque returns and bounces.
- Charges when using ATMs and other services of the bank.
- Cash withdrawal limits.
- The terms and conditions of Internet and mobile banking.
- Offers and preferences an account holder can avail as a customer of the bank.
Find below interest rates on savings account offered by the different banks.
A savings account can differ in benefits and privileges depending on the account holder. For example; a salary based savings account can be a zero balance account. A senior citizen holds special privileges and enjoys a higher interest rate. Some banks offer women entrepreneurs benefits and a lower interest rate on loans if they hold a savings account with the bank.
A Savings account can talk volumes about your financial capacity and your saving and spending habits. Similarly, holding multiple such accounts and using them purposefully is also a great way to segregate your income. This enables you to spend cautiously, save judiciously and fall back upon those funds during times of emergency.
Your transactions on the savings account reflects your financial discipline and the way you live life. Remember, a good running balance, a long relationship with a bank, and no cheque bounces are the simple things you must have in your account to get a clean chit for any loan that you may seek.
This article has been contributed by Right Horizons