Don’t blindly open a savings account. Ask these questions to your bank representative to know whether you are choosing the right account.
Savings account is a basic financial need. It is imperative that everyone has at least one savings account if not more. A savings account is an integral part of everyone’s life and one choose select a savings account selectively. Nowadays, many banks come with various promotional offers to lure customers in to opening a savings bank account with them. Choosing a wrong savings account may not help you with your financial needs. So, before you go ahead and open a savings account, here are some of the questions that you should ask yourself before opening a savings account.
The interest rates on savings account vary from bank to bank. While traditional banks offer lower interest rates, online or digital savings account offers higher interest rates on savings account. A higher interest rate means that your savings will earn more interest which will help you to grow your savings. For e.g. the savings account with 6% interest rate will earn you double the returns than a bank account with 3.5% interest rate.
Many banks have an initial deposit requirement to open a savings account. This too differs from banks and banks and savings account to savings account. International banks and savings account for elite and high net worth individuals have higher deposit requirements. Banks have initial deposit requirement because banks need to make more money from deposits than the cost needed to maintain the account.
Before selecting a bank account, it is better to go for a savings account that have less deposit requirement or nothing at all. Many online or digital banking savings accounts do not have an initial deposit requirement as it is cheaper to manage online accounts. They come with virtual debit cards and everything can be done online. Digital savings accounts like Kotak 811 do not have any initial deposit requirement.
Other than the initial deposit requirement, account holders also have to keep a minimum balance. Minimum balance is the least amount of money that you have had in your bank account during the whole month. When you are required to keep a specified minimum balance in your account, it means that your account balance cannot drop below the specified amount, or you will have to pay a penalty charge. Some banks have minimum daily balance and average monthly balance. In daily minimum daily balance, your balance can come below the specified amount but it should be higher than the requirement at the end of the business day. Other banks have requirement of average monthly balance where at the end of the statement cycle, the bank averages the balances — by adding them up and dividing that figure by the number of days in your statement cycle.
Hence, check for the minimum balance requirement of your savings account. Many banks like Kotak Mahindra Bank do not have any minimum balance requirement.
Banks also charge annual maintenance charge on their savings account for their various features. Besides, annual maintenance charges, banks also have transaction charges for ATM and other services. Few banks also charge for account closure or non-maintenance of minimum balance. Although, the charges of the banks may not seem like a huge amount, it may accumulate to a large amount in a few year’s time. Hence, it is important to steer clear of savings accounts that have charges. So, look for a savings account that have minimal to no charges. Kotak 811 does not have any charges.
Ask these few questions before you open a savings account so that you can take the maximum benefit out of your savings account.
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