Almost all of us employed in a firm have a basic understanding of salary accounts. These accounts are simply what their name suggests; an employer helps its employee to open bank accounts in which they can credit their salaries at the end of each month.
The salary accounts are opened in the bank that deals with the organization's financial transactions. On the contrary, anyone can open a savings bank account in the banks they prefer, where someone can save funds and use them based on their convenience.
However, to understand the basics of how to convert a salary account to a savings account, you will need to understand the basics of both the bank accounts and then decide for yourself.
Key features of salary account
To understand what a salary account is and how it is different from a savings account we must know some of the salient features that it holds
- Zero Balance Maintenance - Salary accounts, in most cases, do not require the account holder to hold a minimum balance so that the account can remain active.
- Free Drafts & Pay Orders - Salary accounts usually equip account holders with the facility of drafts and pay orders without any charges.
- Freedom From Debit Card Charges - Debit cards offered with salary accounts, in most cases, arrive with a waiver of yearly charges as well as the issuance charges.
How to change a salary account to a savings account?
In case you have just shifted your jobs and have got a new one, the salary account that you already hold in the last company will automatically change into savings account if there is no salary credited in the same for 3 months.
Also, to note, the privileges you held while it was a salary account will be nullified and it will act as a traditional savings account and its rule will imply the same as directed by the particular bank. Hence, in case you have changed jobs, here are some of the things that you must know before you change your salary account to a savings account.
Salary account & your new job
Before you opt for the change of salary account into a savings account you must ask your new employer if they hold their employee’s salary accounts in the same bank as you did in the last organization.
If they do so, you can simply ask them to make the same account work as your new salary account in the job you have
Do you need another savings account?
Suppose someone's latest employer does not have an account with the bank where they previously held a salary account.
In that case, they can consider whether you would like to form additional savings bank account for that salary account. Now, there are two ways to go about this. If the last salary account was the first bank account a person ever owned, then it is advised to convert that salary account to a traditional savings bank account.
In this way, an individual has a savings bank account and a current salary account where they can get credits from other sources and make payments for the investments like Systematic Investment Plans (SIPs), EMIs for a loan or insurance you may have taken.
Check for the minimum balance requirement
Individuals who hold savings bank accounts ought to maintain a particular amount in the bank account as a minimum account balance (the bank sets the cap). So, while transforming the salary account to a savings account, make sure to review the minimum balance needed to maintain in the bank account. It is vital to track the minimum balance requirement as most Indian banks levy charges for non-maintaining the savings account minimum balance.
Access to branch locations and ATM
One of the most significant factors influencing a person's choice of a bank is its accessibility. Before someone thinks of converting their prior salary account with a certain bank to a savings bank account, do find out whether the bank has a readily available branch as well as an ATM network, not just near your home or workplace but also at places and areas which a person visits frequently.
Remember to change the communication address
The employees usually provide the office address for all the bank-related communication for a salary account. Nonetheless, while converting the salary bank account to a savings account, one must keep in mind to change the address for all the bank-related communication.
If one forgets to get their addresses edited with the bank, then all the details related to the account will be sent to the last office address and can be misused.
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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and 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.
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