How to select a Savings Account

For most of us, opening a savings account is an absolute no-brainer for the sheer simplicity and utility that it entails. After all, savings account is that type of account which serves as a contingency fund to meet unforeseen expenses like car repairs, medical bills or even educational purposes.

With the proliferation of digitalization at a burgeoning pace, the process of creating a savings account has eased up considerably. Appearance can be deceptive and something as seemingly normal as a savings account may have myriad flavors in the face of the evolving dynamics of financial landscape- as opposed to the same old vanilla.

In India, there are over 200 types of savings accounts that offer distinct offerings to suit the nuanced requirements of the customers. Different banks offer something extra or different that its counterpart does not. By the same token, there is a set of features that finds convergence in most banks’ offerings, regardless of their type and scope.

Like always, it pays to be crystal clear on the purpose of opening such types of accounts to avail the banking facilities based on your preference and needs. Here are six such considerations:


Number of options

Does the bank you’re planning to open a savings accounts offer facilities like Cheque book, Debit card, Net Banking, Balance Sweeping, Credit card linked with Phone Banking? In the wake of the much-talked about demonetization drive, these facilities deserve your careful consideration.

It wouldn’t be a bad idea to maintain a higher minimum deposit if that means provides you gain access to most or all of these features. Remember, opening a savings account is an important decision with significant implications on your finances, so take your time exploring different options.


Minimum Deposit

Now, there are some banks that need you to put in a minimum deposit before they let you open and activate your account. This amount can be as much as Rs 450 per month. They usually do this to recover the costs incurred by setting up a new account and its subsequent maintenance, which can be a tedious process in more ways than one.

While most banks do offer BSBDA (Basic Savings Bank Deposit Account) with zero balance, they offer very limited banking services with strict restrictions on the amount and frequency of deposits, withdrawals, deposits, ATM transactions and amount transfers.


Monthly Deposits

This is a must-have feature when it comes to opening multiple accounts. Here, you need to ensure that there is a minimum monthly balance, or continue to deposit a fixed amount if you want to reap the benefits of a reasonably high interest rate.

To that end, it would be useful to determine exactly how much you’re able to save each month before looking for a bank that accommodates bonus rates for meeting this criterion. You may also want to consider setting up an automatic deposit in the account.


Service Quality

Today, you can avail most banking services offered at a physical branch on your fingertips using online banking and mobile apps, which obviates your need to make repeat visits. That said, there are services like locker and cash transactions for which, you may still need to pay the occasional visit.

Thus, closely observe the efficacy and quality of these services before setting up a savings account because any lapse now can be a nuisance later.  In this parlance, private banks typically surpass their public sector counterparts.


Interest Rates

As you proceed further in your research, you’ll need to wrap your brains around a number of banks waiting to lure you with their offerings. For example, Kotak Mahindra Bank and Yes Bank offer an interest rate of 6% (for balances of over Rs 1 lakh) while most others offer between 4-5%. As per the section 80 TTA of the IT Act, it is possible to get tax deductions of up to Rs 10,000 for the interest accrued from all bank accounts.

Many banks also offer a higher promotional interest rate to attract new account holders; this ‘higher’ rate is valid only for a short period of time before going back to the normal rates. Ideally, you would want to consider other factors other than a temporary higher interest rate which serves little purpose.



A number of accounts lack facilities that let you withdraw money from any ATM. Thus, if you need to access your savings account, you’ll have to transfer the amount into your transaction account (linked with the ATM) to take it out. If you’re one of those who withdraw money on a regular basis, zero in on an account that accommodates decent ATM facilities with low transaction fees on using the ATM facilities of other banks.


Account-related Charges

While there are many savings accounts that don’t impose any charges, others do entail numerous fees, such as:

  • Branch deposit fee
  • OTC transaction fees
  • ATM withdrawal fee
  • Internet banking fee
  • Cash deposit fee
  • Cheque book and Debit card charges
  • Non-maintenance of minimum monthly balance
  • Charges for cheque bounces
  • Charges for duplicate pass books

These charges may vary across different types of banks and accounts. Before choosing a savings account, take a close look at all the possible applicable charges to make the most of your savings account. Public sector banks usually have lower service/transaction charges.

Summing it up

An ideal savings bank account is like a well prepared dish that should have the ideal mix of the right ingredients at the right time. Also, do note that your banking journey does not end by merely opening a savings account; it begins from there! The idea is to develop and nurture a healthy relationship with the bank so that they can serve you better in future – be it for further investments, loans and savings, among others.