Savings Account: All you Need to Know

Saving gives you more financial freedom for a brighter tomorrow. It increases your options to make larger purchases later. Most importantly, it gives you peace of mind and a safety net for unplanned expenses. Besides saving money, wouldn't it be wonderful if this money could grow? That's precisely what a savings account does for you. Here's all you need to know about this essential bank account.

What is a savings account?

A savings account is the most basic type of bank account where you can keep your money safe and earn some interest on it, too. It's not just for those with a regular income; anyone can open a savings account by submitting the relevant KYC documents and filling out the bank's application form.

Why should you open a savings account?

There are several advantages of opening a savings account. Here are a few:

Most liquid investment

Your money remains highly accessible even when held in a savings account. There's no lock-in period or tenure, so you can deposit and withdraw cash anytime. You can make online payments or receive money through online transfers 24/7. This is probably the most convenient way to grow your money without locking or risking it.

Safer than your closet

A bank is always physically protected by guards to keep your money safe. But there's more to bank security than just that. All banks in India need to provide insurance coverage for savings accounts as per RBI (Reserve Bank of India) regulations. This cover, provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), is up to ₹5 lakhs. You can request additional coverage for a nominal fee.

Grow your money

A savings bank account is the easiest way to grow your money, as banks offer interest on your money. The interest rate can vary between banks and may change over time. Banks calculate interest based on the daily closing balance in your savings account, as per RBI regulations. The accumulated interest is transferred into your savings account either monthly or quarterly, as per the bank's policy.

Tax-free earnings

Interest of up to ₹10,000 per year is tax-free according to section 80TTA of the Income Tax Act. Any interest accrued beyond this during a financial year falls under capital gains and is taxable. You must declare the additional interest in your ITR (income tax return) under the category "other sources of income."

Easy to open and use

You don't need proof of income or a good credit history to open a savings account online. The process and eligibility are straightforward. Since your money is entirely risk-free, you don't need to bother with researching the markets. Simply choose a bank with the best features and open a savings account.

Helps build a habit of saving and investing

Your savings account balance gives you an idea of how much you can invest every month. You can use your savings account to transfer into a recurring FD, insurance, mutual fund SIP, or other wealth generation policies. On maturity, the money can be directly transferred into your savings account.

Online access

Choose a bank that offers access to your savings account via their website or mobile banking app. You can check your account balance and transaction history, make transfers, receive money, and monitor deposits and withdrawals in real-time. Some banking apps even allow you to set up auto-debit instructions, apply for a debit or credit card, and contact customer care.

Stay updated even without online access

Even without online access, the bank may send you notifications every time there is a transaction. You may receive these via SMS. Your bank may even send out information on your account balance every week.

Salary cum savings account

You can open a savings account that works as a salary account. Salary accounts include benefits such as a free chequebook, zero-balance, international debit card, instant low-interest personal loan, and insurance cover.

Features to look for in a savings account

Looking for the best savings account? Here are a few features to consider before applying:

Zero balance facility

Some savings accounts have a minimum balance requirement. If your account balance falls below the specified minimum, you are charged a penalty. Avoid these hassles by choosing a zero-balance savings account, which offers greater control over your money.

No cap on deposits or withdrawals

Some savings accounts allow a limited number of cash deposits and withdrawals a month. If you may need to deposit or withdraw often, choose an account with unlimited withdrawals.

Debit card

A debit card lets you withdraw money from ATMs or make payments when shopping online or offline. Look for a bank that offers a free debit card with your savings account and consider whether the bank has a vast network of ATMs.

Zero charges for online facilities

Some banks charge fees for certain online facilities, like using IMPS for instant transfers. Choose a bank that does not charge for such transactions or other online services.

Transparent account-related fees

Banks may charge fees for specific account-related activities. Find out about all the fees and compare between banks to make an informed decision.

E-mandates or recurring payments

Automated payments are a boon if you find it difficult to remember due dates for bills or EMIs. The bank should allow you to set and revoke computerised payments from your savings account.

High-Yield savings account (HYSA)

You can opt for a high-yield savings account to earn up to 10 times more interest than standard accounts. These accounts usually have some minimum account balance requirements and may charge maintenance fees.

Cashback and rewards

Nowadays, you can accumulate rewards even by using your debit card. Open a savings account that comes with a debit card offering attractive rewards or cashback.

Excellent customer services

The best savings account is not just easy to use but also offers prompt customer support to resolve issues.

Additional facilities

Some banks offer special savings accounts for women, kids, senior citizens, or families, often including extra rewards or benefits.

How to open a savings account?

Opening a savings account can be very simple when you choose the right bank. Keep your details and documents handy. For online applications, have digital copies of your documents ready. For offline applications, carry the originals and photocopies to the branch.

Steps to apply for a savings account:

Check your eligibility:

Nationality: Indian citizens can open a savings account with any bank. The terms will depend on whether you are a resident or non-resident Indian. Foreign nationals residing in India can also open specific types of savings accounts.

PAN card: Only PAN card holders can apply for an account. That's why kids need an adult introducer.

Age: Applicants above 18 can apply directly. To open a minor's account, a parent/guardian must accompany the child.

Aadhaar card: Linking your aadhaar number with your account makes you eligible for government subsidies. However, an aadhaar card is not mandatory to open a savings bank account.

ID and Address proof: Use your voter ID, passport, aadhaar card, another bank's passbook, or ration card. Note that a driving license is only an ID, not residence proof.

Photo ID: When opening your account offline, submit passport-sized photographs. You may also have to click a selfie or record a video on the mobile app while applying for online applications.

Apply via your preferred mode:

Offline:

• Visit the nearest branch of the bank with all the documents.
• Fill out the form, paste your photograph, attach self-attested copies of your documents, make the first deposit if required, and apply.
• The bank will update you when your account is opened and functional.

Online:

• Register with an email ID and phone number on the bank's website or app.
• Locate the "Open Savings Account" option, choose the type of account, provide your details, and upload documents or videos for KYC.
• The bank will verify your details and update you on your application status.

Most banks in India take about 7 to 10 days to complete the account opening process and dispatch the joining kit to the registered address. This kit includes the terms of the account, the first free chequebook, and a debit card.

Open a zero-balance savings account with Kotak811 to enjoy all the benefits while you save and earn interest on your money.