Savings Account- Features and Benefits
03 Jul 2019
A savings bank account is the most basic bank account available. It is an account that allows you to pool in your finances and manage them. The funds are available to be withdrawn at any time. With the different needs and requirements of the customers, banks have begun offering different kinds of savings accounts to meet these different needs. Some types of savings accounts are:
- Regular savings account
- Salary accounts
- Kids savings account
- Womens Savings account
- Institutions, Government savings account
- Basic Savings Bank Account (BSBD)
- Senior Citizens Savings Accounts
- Rural Savings Accounts/ Jan Dhan accounts
Here are some features of savings account:
- A savings account comes with a passbook and cheque book feature
- You can receive payments and make payments from your savings accounts
- Auto debits and auto credits can be set up from your savings accounts
- Savings bank account holders can access internet banking and mobile banking for their needs
- Banks offer ATM cum debit cards to savings bank account holders
- A savings bank account earns low interest rate but allows the customer the freedom to withdraw funds at any time subject to a limit on monthly withdrawals.
- It is possible to pay bills from your savings account
- Banks also send transaction alerts to their customers via SMS and email
What are the benefits of a savings account?
While a savings account has a lot of utility, it only earns interest at 3.5% to 6% per annum. In such a case, are there any benefits of having a savings account? The answer is yes. There are many benefits of opening a savings account. Let us consider them.
Here are the benefits of having a savings account:
One of the benefits of opening a savings account is that it offers you liquidity..
Safety of funds
A savings bank account is a safe avenue to keep your funds rather than keeping it on hand where it is susceptible to get lost or stolen. Another important point to remember is that each account is insured by the Deposit Insurance and Credit Guarantee Corporation for up to Rs. 1 lakh.
Additional earnings because of auto sweep facility
Most banks have an auto sweep facility where funds above a particular limit are automatically converted into a fixed deposit. These funds earn interest at fixed deposit rates as compared to regular savings rate. By enabling this feature, the depositor can get full benefits of keeping money in a savings account.
Automatic debits for payments
Banks allow customers to set up automatic debits for utility payments and bills. In such cases, the utility company or telecom company raises a demand with the bank and the bank automatically debits the bank account. This is a convenient way to make payments on time. When you take a loan, you can set up an auto debit facility from your savings account where the installment will get debited from the savings bank account and
Auto credits for investment incomes
One of the benefits of keeping money in a savings account is that it can be linked to a demat account and other investments. In such cases, the income from dividends and interest gets automatically credited to the bank account. This convenience ensures all incomes get pooled in one account.
Convenient fund transfers
It is extremely simple to make fund transfers from a savings account. There are different modes of a fund transfer which are easily available in both internet banking and mobile banking. A savings bank account holder can transfer funds using NEFT, RTGS, IMPS and UPI.
There are benefits of a joint savings account. Having a joint account provides greater flexibility since all the joint holders can sign cheques and operate the bank account. It makes it easy to track spends and incomes. A joint account can be maintained for household incomes and expenses which is excellent for financial planning.
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Saving accounts features
What are the features of a savings account?
A savings account is the first step a person takes toward saving. As the name suggests it is a place where the savings are stored but it is not an investment.
The savings account is the conduit through which investments can be made. But the first step starts from taking the money out of your money box and into a bank.
Why have a savings account?
Rather than keeping money at home in your money box, keeping it in a bank is suitable as it offers interest on the deposit made. This is the main reason why you have a savings account. The interest rate is not high, but it helps in partially softening the blow of inflation. In other words, the money one deposits in the bank are working to give you some return. Not only is the money in the savings account safe and earns interest it has other advantages also.
Features of a savings account
The following are the features of savings account
First, the money can be withdrawn at any point in time. With ‘Any-Time-Money’ (ATM) counters available across the country, a saving bank account holder who has debit/ ATM card facility can withdraw money from anywhere in the country. This adds a safety element where the depositor need not move around carrying cash in his pocket.
With e-payment on the increase, the saving bank account helps in regular monthly payments like that of electricity, society maintenance, telephone and mobile bill payment, insurance premium payment among others.
Salaries can be directly credited to the savings bank account. This helps both the employee as well as the employer. For the employer with a single click of the button, money is transferred to all the employees. For the employee, they are saved the travel to the bank as well as can have the money credited in their account at a faster pace.
Post-retirement the same savings bank account helps in getting a regular pension.
Loans that a person takes are generally linked to the savings bank account which is the primary account where his salary is deposited. Direct electronic instructions can be given from the savings bank account or Post Dated Cheques (PDCs) from this account. Savings bank account often eases the process of availing loans.
Cheque bounce history of the customer’s savings account tells his creditworthiness. A customer with no defaults on loans on his name has a much higher credit rating and finds it easier to get loans.
Having a savings bank account encourages the habit of saving rather than keeping cash in hand. This discourages impulsive shopping.
Savings account helps in accessing other financial instruments like online trading, mutual funds investments through direct transfers among others.
A standing instruction can be given to the bank where if the amount in the Savings Account crosses a particular threshold it will be transferred to any other higher yielding instrument.
It helps in making travel plans easier by booking tickets as well as hotel bookings through online mode.
The passbook or electronic statement of the savings bank helps in keeping an automatic tab of where the money came from and where it was spent.
At the end of the year, it helps in filling your tax returns with the income tax authorities. Since all the transactions are recorded in the bank statement, a salaried employee has the little hassle to file his returns.
Savings account opening
Want to open a savings account? Follow these steps
A savings account is perhaps the first interaction a person has with a bank. It is the most basic of bank accounts. It offers the safety that a depositor looks for, plus interest rates and the flexibility of withdrawing money anytime and anywhere.
Before looking at the features of opening a bank account let’s first look at how to open one.
How to open a savings account
There is two main ways to open a savings bank account:
Walking to a branch
You can go to your nearest Bank of Baroda branch and ask the bank officials how to open an account. You are asked to fill out a form. The bank official will ask for details required as per the ‘Know Your Customer’ (KYC) format that includes address proof, identity proof, statutory government registrations like a PAN card will be required along with your photographs. You will also be asked if you want to open a joint account with anyone else. In the case of a child, a minor account is opened that is operated by the parent.
If you want to open your savings bank account online, you can do so either through a computer or a mobile way of opening a form. Most details are captured online in this case with a minimum physical interface with the bank.
Who can open a Savings Bank Account?
Each bank has its own Terms and Conditions which needs to be satisfied before an account is opened. Most of these conditions are common and set by the central bank – Reserve Bank of India.
At the time of opening an account, you will be made to sign a number of documents which include that he has understood all the Terms and Conditions of the bank. It is thus necessary to read through the document before signing. Only illiterate depositors can use their thumb impression.
Signature and KYC Documentation
Bank signature is the key to operate the account. Signature mismatch not only leads to heartburns but also other problems which can result in blocking of the account. You will need to be careful while signing the form and maintain this signature throughout life.
KYC Documentations have increased over the year. The main documentation needed is for the identity of the customer and identifying his address.
In identity proof the documents that are generally valid are – passport, driving licence with photograph, Permanent Account Number (PAN Number), Voters identity card, Job card issued by NREGA (National Rural Employment Guarantee Act, 2005) – attested by a government official and an Aadhar card or any other document issued by the Unique Identification Authority of India.
For address proof, you can submit any of the above documents apart from the PAN card
Banks can offer Pass Book facility for a savings account holder for free or for a small fee. You, however, can access the statement of your account online using internet banking.
Safety of savings accounts
Savings account in a bank is generally insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC).This insurance facility offers an assurance that your money is safe.
Types of savings account
Within the savings account, different banks offer a variety of accounts depending on the utility of the account and the age of the account holder.
Some banks offer a zero-balance account, but these are done for salaried accounts or for some professionals and students.