Getting more from your savings account

Banks are now offering value additions to the simple savings account. Here's how you can make the most of them.

From a basic no-frills account to a pampered premium account and smart deposit linked accounts, savings bank accounts come in different packages to suit every possible need. A careful look at the various options would help you make the most of your investment in the humble savings (SB) account too!

Frills attached

To bring the financially excluded into the banking fold, almost every bank offers a ‘no-frills account' to customers. Zero minimum balance, relaxation in KYC norms, lower or no fee/charges, restrictions on the number of withdrawals and the maximum amount that can be invested (Rs 50,000), limited availability of ATM and Internet banking transactions are some of the common features. Given the limitations, you might not want to opt for this type of account. Well, take a look at the many ways in which banks have added value to the ‘no frills' offer.

IDBI Bank's ‘Sabka account', for example, gives you a debit card and cheque book and allows phone, internet and SMS banking on this ‘no-frills' account. You can also earn higher rates of interest by investing as little as Rs 100 in a recurring deposit from the savings account every month. Besides, if you can provide the necessary documents to fulfill KYC, then, the restriction of Rs 50,000 will not apply. If your annual income is less than Rs 50,000 and you don't have any other bank account, you can consider HDFC Bank's ‘no-frills' offer too.

While facilities like electronic transfer of funds and utility bill payments are available, whether you meet KYC rules or not, fulfilling KYC enables you to avail a safe deposit locker and sweep facilities too!

So, a ‘no-frills' account is a worthy option for students and dependents who have limited sources of income and restricted banking requirements. That way, you will not be constrained by any minimum balance non-maintenance charges, which can sometimes run into hundreds of rupees. However, going by the curbs, it would make sense to move over to a regular savings account once your needs multiply.

Save more, get more

Even while opening a regular savings account, an informed choice would help you get the maximum benefits. In Kotak Bank, for instance, you can choose from five SB options – Classic, Nova, Edge, Pro and Ace. ‘Classic' account holders can send demand drafts or cheques for collection to all places where the bank has branches, for free.

You will also be assigned a dedicated relationship manager. If you can keep an average quarterly balance (AQB) of Rs 20,000 under the ‘Pro' account, you can avail a gold debit card with higher limits and free cash/instrument pick-up and delivery facility. This service is not extended to ‘Edge' account holders (AQB: Rs 10,000). SBI has a ‘Savings Plus' and ‘Savings Premium' account, at affordable minimum balance mandates. Under Bank of Baroda's ‘Super Savings' account, if you can maintain an AQB of Rs 20,000, you get free collection and immediate credit of outstation cheques up to Rs 25,000 and no DD charges in addition.

So, take a look at your banking habits. See what kind of transactions you often make and how much you are charged. If you are crediting your salary into this account, chances are that you would hoard much more than what a basic SB account warrants. Besides, the minimum balance is mostly only a quarterly average and not a daily limit.

If you find your account flush with funds, ask your banker for an upgrade. That way, you will enjoy more services free of cost or at a concessional rate and can get higher spending limits on your debit card. Also, most of these value-adding accounts qualify for ‘sweep' facility, which will help you maximise returns. Remember that a savings account currently earns an interest of only 4 per cent while 3-5 year term deposits are available at over 9 per cent.

Sweep it up

Under the ‘sweep' option, SBI ‘Savings Plus' account holders, for instance, can transfer any amount that accumulates beyond Rs 5,000 to a term deposit of 1-5 years duration. Available as an automated facility, this surplus swept-in, will earn interest as applicable to term deposits. Karur Vysya Bank's ‘Rainbow savings account' not only offers to sweep into short-term deposits, but also provides free accident insurance (death) cover of one lakh rupees. What if you need the money back urgently?

To ensure liquidity, all banks offer a reverse sweep too. Under ICICI Bank's Money Multiplier feature, for instance, all linked FDs will be enabled for automatic reverse sweep in multiples of Rs 5,000 on a LIFO basis, when the balance in the SB account falls below Rs 10,000.

The remaining amount will continue to earn interest at FD rates. Many banks offer this option for salary account holders too.

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