How to choose a suitable savings account

Opening a savings account is the first step in getting banking services that allow us to deposit savings and earn interest on them. With the increasing trend of digital payments, it has become more important to choose a savings account that offers better features at lower operating costs.

Here are some tips to help you choose the savings account that best suits your needs.

Choosing a savings account that offers high interest rates

Most consumers look for a savings account that offers a relatively high interest rate compared to others. An account paying high interest on your savings will effectively increase the overall return even if you have to pay some account maintenance charges.

In addition to deregulating interest rates on savings accounts, various banks offer competitive interest rates to add more customers. While most public sector banks offer interest rates ranging from 2.5% to 3.5%, some private sector banks offer interest rates ranging from 6.75% where microfinance banks reach a maximum of 7%.

However, it is noteworthy that these interest rates are only paid to a certain amount in the savings account. Thus, there should be updates with variable interest rates. However, you should know that interest earned above Rs 10,000 on all your savings accounts is taxable according to the tax slab you fall into.

Savings account with low average monthly balance (AMB) requirement for more flexibility

For some savings accounts, account holders are required to maintain a minimum average monthly balance and pay a penalty if they fail to meet this requirement. This limitation is compensated equally in the form of various other benefits, including complementary services such as insurance cover, dedicated relationship manager, pre-approved loan offer, online DD generation, free check book, etc.

Many premium savings accounts carry high AMB between Rs 50,000 and Rs 1 lakh but the interest earned on this amount is relatively low.

There are many accounts like PM Jan Dhan Yojana (PMJDY) account, online account and BSBDA (Basic Savings Bank Deposit Account) where account holders have no AMB requirement but less free services like ATM withdrawal cap, no check book, no debit card, etc.

Hidden charges on a savings account can reduce the effective interest earned

Instead of finalizing a savings account based solely on interest rates, go through the charging schedule. These charges may include annual maintenance charges, ATM fees, fines for non-maintenance of AMBs, transaction charges, fund transfer fees, free ATM transaction fees, etc.

Many premium savings accounts have an annual maintenance charge that can affect the overall interest earned. Some accounts that have little or no AMB requirements also have a limited amount of free ATM transactions.

If you do a lot of ATM transactions, you should choose an account that offers more free transactions, even if the AMB is relatively high.

Additional benefits in the form of exclusive deals and discounts

Many banks offer savings account options with many additional benefits such as complimentary movie tickets, airport and railway lounge access, low / no cost EMI for online shopping, complimentary subscriptions on various portals and OTT platforms, utility bill payments etc.

Tie-ups with different platforms allow these banks to offer healthy discounts and cashback to users which can be beneficial for frequent users of these services.

The rewards program on debit cards offered with Privilege Accounts allows account holders to redeem reward points for exclusive merchandise and complimentary benefits.

People who can handle AMB requirements for a Savings Account can choose these accounts and receive exclusive offers, deals and discounts to further save on their purchases.

(By Gaurab Agarwal, Senior Director,

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