A savings account is a type of bank account that allows you to save a part of your income; while at it, earn interest on your deposit. This type of account is ideal for storing emergency funds and savings for large purchases.
Like bank accounts, there are also; different types of savings accounts. These accounts vary depending on their interest rates, minimum balance required, and withdrawal limitations, among other things. When opening a savings account, you want to pick the option that best suits your financial needs. That's why understanding the different types of savings account is essential.
Importance of Savings Accounts
Savings accounts are important for several reasons. Having a savings account ensures you are financially ready for emergencies which can help reduce stress. It can also help you reach your financial goals without compromising your lifestyle. Above all, having a savings account can help you better manage your funds and develop a saving habit. Ultimately, this can help improve your financial stability over time.
Must Read: Tax Implications of a Savings Account
Different Types of Savings Account
- Basic Savings Account
- Instant Savings Accounts
- Savings Accounts for Women
- Salaried Accounts
- NRE/NRO Accounts
- Zero Balance Savings Account
- Money Market Accounts
- Certificate of Deposit (CD) Account
- Individual Retirement Account
- Health Savings Account
Each of these savings accounts differs depending on interest rates, minimum balance, purpose, among other things. Understanding the difference between these accounts is necessary to choose the type of savings account that will benefit you the most.
For instance, unlike most types of savings accounts, a zero balance account does not have a minimum balance requirement. You might want to consider this option if, for some reason, you cannot afford maintaining a minimum balance. Opening a zero balance account is helpful if you do not have a stable job and income.
Now let's take a closer look at the different types of savings accounts
Basic Savings Account
A basic account is one of the most common types of savings accounts. As the name suggests, a basic savings account is a no-frills account that requires minimum documentation. Generally, these accounts have very low or zero minimum balance requirements and offer standard features like ATM and online banking.
Instant Savings Account
With the help of technological advancements, instant savings accounts have been introduced by some banks. These accounts can be opened online within a few minutes without any physical documents. They come with features such as zero balance requirements, free debit cards, and mobile banking apps.
Savings Account for Women
Some banks offer special savings accounts for women, which come with additional benefits such as higher interest rates, cash-back offers, and discounts on loans. These accounts are designed specially for working women, homemakers, and girl students.
Salaried Account
Salaried accounts are ideal for those who receive their salaries through direct deposit from their employer. These accounts generally offer additional benefits such as overdraft facilities, higher interest rates, and lower loan interest rates.
NRE/NRO Account
These accounts are designed for Non-Resident Indians (NRIs) to manage their financial affairs in India. Non-Resident External Account (NRE) accounts are ideal for storing money earned outside India, while Non-Resident Ordinary Account (NRO) accounts are for holding income earned in India. Both accounts can be used to make payments in India.
Zero Balance Savings Account
As the name suggests, these accounts do not require any minimum balance to be maintained by the account holder. They are suitable for individuals who cannot afford to maintain a minimum balance or students who have just started earning.
Money Market Account
A money market account combines the features of a savings account and a current account. It offers high-interest rates like a savings account, along with the liquidity and flexibility of a current account.
Certificate of Deposit (CD) Account
Certificate of Deposit (CD) accounts are similar to fixed deposits that offer higher interest rates. They require the account holder to deposit a lump-sum of money for a fixed period ranging from one month to five years.
Individual Retirement Account
Individual Retirement Account (IRA) is a savings account that enables individuals to save for retirement. They offer tax benefits on contributions and earnings.
Health Savings Account
Health Savings Accounts (HSAs) allow you to save money tax-free for medical expenses. They offer tax benefits for contributions, earnings, and withdrawals used for qualified medical expenses.
These are some of the different types of savings accounts you can find in the market.
Comparison of different types of Savings Accounts
When opening a savings bank account, you need to compare the options available to find the one that works best for you. Lucky for you, in this article, we'll make your work easier for you. The following is a simple comparison of the different types of savings accounts mentioned above.
| Type of account | Interest rates and potential earnings | Account features and limitations | Accessibility and liquidity |
| Basic Savings Accounts | Low to moderate | No or low minimum balance requirement, limited number of free transactions, no or limited cheque books, debit cards, and overdraft facilities. | High |
| Instant Savings Account | Low | Quick account opening process, no or low minimum balance requirement, limited number of free transactions, no or limited cheque books, debit cards, and overdraft facilities | High |
| Savings Accounts for women | Low to moderate | Special interest rates and discounts on various products and services, no or low minimum balance requirement, limited number of free transactions, no or limited cheque books, debit cards, and overdraft facilities. | High |
| Salaried Accounts | Low to moderate | Salary credit requirement, overdraft facilities, special offers and benefits, no or low minimum balance requirement, limited number of free transactions, no or limited cheque books, and debit cards. | High |
| NRE/NRO Accounts | High | Can only be opened by Non-Resident Indians (NRIs), tax benefits, foreign currency deposits, limited withdrawals, can be joint accounts | Limited |
| Zero Balance Savings Accounts | Low to moderate | No minimum balance requirement, limited number of free transactions, no or limited cheque books, debit cards, and overdraft facilities. | High |
| Money Market Accounts | Moderate | High minimum balance requirement, limited number of free transactions, cheque books and overdraft facilities available, flexible investment options, short-term investment. | Moderate |
| Certificate of Deposit (CD) Accounts | Limited | Fixed interest rate, minimum deposit requirement, no withdrawals allowed before maturity, penalty charges for early withdrawal, flexible term options | High |
| Individual Retirement Accounts (IRAs) | Moderate to high | Tax benefits, fixed or variable interest rate, limited withdrawals, contributions have limits, early withdrawal penalty charges, and various investment options available. | Limited |
| Health Savings Accounts (HSAs) | Low to moderate | Tax benefits, contributions have limits, funds can be used for eligible medical expenses, early withdrawal penalty charges, and various investment options available | Limited |
Conclusion
There are so many types of bank accounts available in the market. These are just some of them. Understanding the difference between these accounts is essential to find the option that best suits your needs.
Please note; different banks may have different types of savings accounts. Before opening a savings account, always explore the types of bank account available. It's in your best interest to go with the bank that offers the most suitable savings account that matches your needs.
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