Home / Money / Personal Finance /  The smart way to choose a savings account

For most of us, a savings bank account is the primary mode for transacting with a bank or financial institution,  and used for online shopping, among others. Savings bank accounts help us keep our money safe and have a lot of significance in our investment portfolio, yet it is the least researched financial instrument. This piece will look at some of the factors that can help you choose smartly the right savings account for all your needs. 

Interest rates: The rate of interest offered on deposits is one important factor that one must check for while assessing the overall charges levied by the bank. A bank offering a competitively higher rate on deposits is always preferable. This is because a relatively higher interest rate can get better returns, effectively beating the persisting inflation rate. 

Gaurav Aggarwal, senior director,, says, “The deregulation of savings account interest rates have led many private sector banks to offer interest rates of 5.5% per annum and above for select account balance slabs. Such rates are even higher than the highest fixed deposits (FD) rates offered by public sector and most private banks." Note that banks can change their savings account interest at any point.

As per section 80TTA of the IT Act, you get a maximum deduction of 10,000 on the interest earned from the savings account __ irrespective of the number of such accounts that you operate..

Look for hidden charges: Go through the ‘schedule of charges’ while opening saving accounts. Some savings account transactions are chargeable right from the first incidence. Others have a predetermined free limit, beyond which they become chargeable. Savings account types with higher minimum balance requirements usually offer more free transactions. 

Raj Khosla, founder and MD,, says, “One should look at the charges levied by various banks on a savings bank account including the annual fees, minimum deposit requirements, penalties on breaching the minimum deposit thresholds, transaction charges, charges on ATM withdrawals after crossing free withdrawal limit, and fees associated with transfers." 

Besides, you should also look out for the limitations on your savings bank account as lenders prescribe certain cash limits, transactions limits, and caps on remittances.

Minimum account balance: Many free services and transactions may become chargeable on failing to maintain the minimum balance. Hence, it would help if you always opted for a savings account whose minimum average balance requirements can be comfortably complied with. Typically, public sector banks have nil or low minimum balance norms for accounts, while most private lenders can demand a considerable minimum balance. 

Adhil Shetty, CEO,, says, “Most of the savings bank accounts have a minimum balance requirement. This means that, on average, the account should hold a minimum set amount. Depending on the bank and the account type, this can be as low as 1,000 or as high as 50,000. Not maintaining sufficient balance can lead to penalties and charges by the bank. Banks also offer a special salary account or zero balance account to employed people where the minimum balance requirement is waived off, and the average balance can dip to zero. However, such an account may require regular salary deposits. So, you must identify how much money you can park in the savings account and select one accordingly."

Customers should check the cumulative services and exceptional privileges provided by the bank,  and whether such benefits justify the incremental costs of maintaining the savings account. 

Branch network: The number of bank branches, the closest branch from your residence or office, the number of off-site and on-site ATM kiosks, and the facilities available at the nearest branch are some factors that can enhance your banking experience. 

Aggarwal says the advent of mobile banking and internet banking has reduced the requirement to visit bank branches.  But consumers may still need to visit their banks for services like locker operation, to make deposits or withdraw cash beyond the daily ATM limits, etc.   “One should also factor in the reputation of the bank branch in offering quality and prompt customer service. Moreover, as banks charge cash withdrawals made from other bank ATMs beyond a free limit, a consumer should also consider the ATM penetration of the bank in places frequently visited by him,"  says Aggarwal.

Mint Take 

Ultimately, your age, stability of income, sources of earnings, categories of expenses, and spending behaviour including frequency of spending are some of the factors based on which you should choose your bank account. For instance, some of you would be looking out for maximum benefits offered on debit cards. However,  for others, debit cards are of not much use if the penetration of PoS devices is extremely low, particularly in remote locations.

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