How to choose the right bank account for your needs

Choosing the right bank account is one of the most important financial decisions you will make. Whether you are looking to save for the future, manage everyday expenses, or avail a financial tool, the type of account you choose will impact your financial well-being. With many options available today, it can be overwhelming to decide which account suits your needs best.

Here are some key factors to consider and help you.

Types of bank accounts

Before choosing a bank account, it’s essential to understand the different types available:

• Savings Account: A savings account is ideal for individuals who want to save money in a bank account and carryout regular financial transactions. These accounts typically offer low interest rates but come with easy access to a range of services like cheque books, online banking and ATM cards, among others. Most banks offer an interest on the amount saved in your account every financial year. If your primary goal is to save money, carry out all your financial transactions through a bank account and earn a nominal return on the savings, a savings account could be a suitable choice.
• Current Account: Current accounts are more preferred by business owners due to higher limit of transactions, overdraft facility and related services. Current accounts can also be opened by individuals. Generally, current accounts don’t offer interest on the balance but come with overdraft facility. A current account is convenient for business owners due to the flexibility it offers for paying bills, withdrawing cash, and making unlimited transactions. These accounts typically come with a debit card and a cheque book, allowing you easy access to funds.
• Fixed Deposit (FD) Account: A fixed deposit account allows you to deposit a lump sum amount for a fixed tenure at a predetermined interest rate. This account is a good option for long-term investment if you’re looking for a higher rate of return than a regular savings account. The FD accounts have become popular due to the assured return they offer. Also, many banks offer higher interest rates on FD investments by senior citizens. You can also avail a secured loan against your FDs.
• Recurring Deposit (RD) Account: An RD account allows you to deposit a fixed sum every month over a specified period, earning interest at a higher rate than a savings account. This is ideal for individuals who prefer saving small amounts every month. These term deposits also offer multiple options over the tenure. You can choose RDs for durations from six months to 10 years depending on your financial goal. Many banks also allow RD investments as collateral against a personal loan.
• Joint Accounts: Joint accounts are opened by two or more individuals. They are ideal for couples, business partners, or family members who want to manage finances together. Joint accounts come in both savings and current options, with equal access to all account holders.
• Student Accounts: Banks offer special accounts for students that typically come with no fees and minimal deposit requirements. These accounts are designed to help students manage their finances while giving them the tools to learn about financial management.
• Women’s account: This is a type of savings accounts designed only for financial benefits of women. Banks offer several customized services as per the needs of the women through these accounts. The aim of women’s accounts it to increase financial inclusion for women. Such accounts come with several benefits like cashbacks, higher interest rates, flexible loans, lower deposit amounts, priority banking and unlimited ATM withdrawals, among others.

How to choose the right bank account for your needs

Here’s a step-by-step guide to help you make the best decision.

List the account features you need

Almost all savings accounts offer basic features like:

• A debit card for shopping and ATM withdrawals
• The ability to receive money, like wages or benefits
• Transfer money between accounts or pay others
• Set up regular payments (like bills)
• Open a joint account
• Applying for credit cards
• Avail loans
• Cheque book facility

Some accounts offer extra perks, such as:

• Interest on savings
• Cashback on spending or bills
• Interest-free overdrafts (good for students)
• Free overseas spending
• Access to special products or discounts
• Packaged insurance (example, travel or phone cover)

Check for conditions attached to these perks, like minimum deposits or Direct Debit payments, and watch out for any monthly fees.

Decide how you would like to contact the bank

Most accounts offer online and mobile banking for easy access to your account. You can choose from savings account and current account as per your financial needs. For example, a current account will be more suitable if you run a business, compared to a savings account. Interest rate offered by the bank and other facilities like ATM withdrawals, zero balance feature, priority banking and transaction fees, among others, should also be taken into account before finalising to open an account with a bank.

If you are considering an overdraft

An overdraft lets you spend more than what’s in your account, but it can come with high-interest rates. It is usually best for emergencies or short-term use. When choosing an account, check if:

• There’s an interest-free limit for overdrafts
• The overdraft interest rate is reasonable
• There are fees for insufficient funds

Check eligibility criteria

Some banks may require:

• A minimum monthly deposit
• KYC compliance with address and identity proof
• The customer should meet the minimum age criteria of 18 years and above. However, parents and legal guardians can also open an account in the name of the minors.

Compare deals and read reviews

Use comparison tools to compare account features, fees, and charges. Read reviews to find out how others feel about customer service and the overall banking experience. You can also check websites that provide detailed comparisons.

This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.