A savings account offers dual monetary benefits- saving your hard-earned money and earning interest on it. Savings accounts are liquid in nature, which means that the money in them can be easily converted into cash. Savings accounts give you the flexibility to complete transactions whenever you want. But did you know that even savings accounts are subdivided into different types? Each type of savings account has different features, benefits, and minimum balance requirements.
Continue reading to learn about the differences between various types of savings accounts and how to select the most appropriate type of savings account for your needs.
What are the Types of Savings Accounts?
There are 6 major types of savings accounts to choose from-
Regular Savings Account
Regular savings accounts are the type of savings accounts where a user can deposit money and earn interest on it. Regular savings accounts allow users to withdraw funds whenever they need them, with no additional restrictions. It is one of the most basic types of accounts that most people choose.
Features of Regular Account
- The account holders earn interest on the deposited amount
- One can withdraw money at any time and from any location
- Savings account holders can use their debit cards to make offline, online, or ATM transactions
- Users can transfer money from one account to another using internet banking or mobile banking
- It is mandatory to maintain a minimum balance to operate the account in order to avoid any minimum balance requirement based penalty
- Account-holders receive a passbook and a cheque book to help them track and make payments
- A savings account is one of the most secure ways to save money
Salary Savings Account
A salary saving account is one designed specifically for salaried professionals. Employers open these accounts for their employees in order to transfer the latter’s monthly salary.
Features of Salary Savings Account
- A salary savings account has no minimum balance requirement
- A salary account holder receives a cheque book/passbook, monthly e-statements, a debit card, phone banking, credit card offers, and access to net banking, among other benefits
- A salary account can be used to pay utility bills
- The holder of a salary account can also take advantage of various loan offers
- A salary account can also be used to transfer funds
Zero Balance Savings Account
A zero balance savings account is one in which the account holder is not required to keep a minimum balance. These types of accounts allow users to withdraw money at any time while leaving the account empty.
Features of Zero Balance Savings Account
- Net banking, a cheque book/passbook, a debit card, and other services are available with zero balance accounts
- Zero balance account holder is not charged first few ATM transactions every month
- These are the types of accounts that are appropriate for people who earn just enough to meet their needs
- This type of account encourages saving habits
Kids Savings Account
A kid’s savings account is another type of savings account that a child under the age of 18 can use. A child’s savings account, however, must be linked with the parents/guardian account to ensure a minimum balance in the child’s savings account.
Features of Kids Savings Account
- Encourages children to save money
- Provides benefits similar to a traditional savings account
- ATM/Debit card is also issued to the child, with daily withdrawal limits
- Any balance in the child’s account that falls below a certain threshold will be maintained by deducting the amount from the parent’s bank account
- After the age of 18, a child’s savings account becomes inactive. Following that, the child’s savings account must be converted to a regular savings account
- One must maintain a minimum account balance to avoid any penalty
Family Savings Account
A family savings account is a type of savings account in which individual family members pool their individual savings accounts under a single “Family ID.” Account-holders can manage all of the accounts associated with a single account separately. A family savings account can be opened by anyone in the family, including a spouse, children, siblings, in-laws, grandchildren, grandparents, or parents.
Features of Family Savings Account
- When you combine multiple savings accounts under a single ID, you must keep a minimum balance on all of them. For example- Assume four different savings accounts, each with a minimum balance requirement of Rs. 5,000, Rs. 7,000, Rs. 4,000, and Rs. 10,000. In this case, the minimum account balance required in the combined savings account will be equal to the highest minimum balance requirement from the individual accounts, which in this case is Rs. 10,000
- In the event of an emergency, a family savings account provides the option of sweeping balance. Assume you have Rs. 10,000 in your bank account. You wrote a cheque for Rs 25,000 and deposited it in the bank without first checking your account balance. Instead of cancelling or bouncing the cheque, the bank will deduct Rs 15,000 from another clubbed account and complete the payment to the receiver
- The primary account holder will be penalised if the minimum account balance is not maintained.
- A minimum balance will still be required if a salary savings account (where no minimum balance is required) is merged under the family savings account facility.
- If the primary account holder wishes to leave, the family savings account can be dissolved with everyone’s consent
- The minimum and the maximum number of savings accounts that can be linked to a single Family ID varies by bank
- Any individual account holder may leave the family group by notifying the bank
- The privacy of each individual account holder is protected
- Family members can choose who will be the primary account holder and receive a Primary customer ID
Senior Citizen Savings Account
A senior citizen savings account is a type of account facility that is designed specifically for seniors (individuals who are above the age of 60 years). Banks offer relatively high interest rates on deposits made by account holders. Senior citizens can benefit financially from a senior citizen savings account because they receive additional tax breaks.
Features of Senior Citizens Savings Accounts
- Individuals over the age of 60 are eligible to open this type of account
- Individuals over the age of 55 who have retired early can open senior citizen savings account through superannuation or the Voluntary Retirement Scheme
- Retired military personnel are also eligible to open a senior citizen savings account if they meet all of the requirements
- NRIs and HUFs are ineligible to open a senior citizen savings account
- Individuals who want to open a joint account with their spouse can do so with a senior citizen savings account
- Indian residents
- Parents/guardians on behalf of the child
- Hindu Undivided Family