A savings bank account serves several purposes for an account holder. While it is a safe avenue to park your money or an emergency fund, it also creates a relationship with the bank, which gives you access to different investment avenues.
A good banking relationship further helps in opening a plethora of additional and exclusive benefits offered by the bank, depending upon your relationship value. These benefits can include waiver on charges, discounts on products, special privileges and more. However, there are a few needs that the account should not be used to fulfil. Here are three mistakes to avoid.
1) It Is Not An Investment Tool: Usually, savings account interest rates are low. The present range is 3.5 per cent to 4 per cent at most banks. Remember, the savings bank account is not an investment tool. Use it only to keep surplus funds for the short term until they are invested and used elsewhere. The interest should not be your primary consideration for selecting a savings bank account. For example, for Rs 10 lakh, the difference in interest at the end of a year between an account with 3 per cent interest versus another offering 2.5 per cent interest, comes to just Rs 5,104. Keep a certain amount as emergency funds for easy access. Don’t keep large sums in the account. More than the interest, consider the facilities the account or the bank provides, and the associated charges. For example, some banks may offer higher ATM withdrawal limits.
2) The Minimum Balance Has To Be Maintained:Most types of savings accounts need to have a minimum balance, though some such as salary accounts don’t. This can be as low as Rs 1,000 or a much higher sum depending on the bank and the type of account. Not maintaining sufficient balance can lead to penalties and charges by the bank. So, it is essential that you identify the amount you can leave in the account to meet the minimum balance criteria. If you think you will fall below this limit quite frequently, then it is advisable to look for another type of savings account.
3) Many Services Are Chargeable: Several banks may have privilege accounts that allow account holders a range of benefits such as unlimited cash withdrawals, discounts on bank locker facilities, priority service at banking zones, personal bankers, and so on. These may not be available with a plain vanilla savings bank account, or if they are, there may be higher service charges. It is also likely that these services are available on the condition of high average monthly or quarterly balance in the account. Some other services such as SMS notification service, cash handling, extra ATM cash withdrawals and many more, come with charges attached.