5 Things to Note before Opening a Savings Account

Don’t decide on the first savings account you come across. Compare the following basic aspects of different accounts before you open one:

1. Bank’s Reputation

The first thing you should consider is with which Bank to open the account. You have choices of regular banks, online banks and also of other financial institutions. Choose an organization with which your money is safe. In India, banks which are listed in Schedule A of Reserve Bank of India are taken to be trustworthy.

Again, customer service is a big issue. Make sure the bank you choose is good at it.

2. Accessibility of Funds

Online only banks are nowadays becoming popular. They pay higher interest rates and also have favorable fee structures. However, if you expect to make frequent withdrawals, it is better not to go for this option. It can take quite a few days for the money to be transferred from the online bank account to your physical bank account.

While opting for a physical bank, make sure that your bank has ATM and operating branches in your nearby and also has convenient opening hours.

3. Interest Rate

Before opening a savings account, make sure it generates reasonable interest income. Different institutions have different policies regarding the interest rate. Some pay a fixed rate after your balance reaches a threshold level; others pay a percentage of the account balance.

If you are going for a basic savings account, don’t expect to get a very high rate. High Yield Savings accounts, on the other hand, promises great returns, though, restrictions are way too many compared to the basic accounts.

Best is to compare Annual Percentage Yield (APY) which is based on the compound interest rate. The more frequent the interest compounds the better. Do some research and you are sure to find an account that compounds interest daily.

4. Requirements

Not all but many savings accounts come with minimum initial deposit and minimum monthly balance requirements. If you are opting for such type of accounts, meet the balance requirements constantly to avoid penalty charges. Many institutions offer savings accounts that set no such conditions. However, the interest rates are usually lower on these accounts. Take note of these requirements and choose one that you can afford.

Opening a savings account isn’t a big hassle. Still, choose the account that involves lesser paperwork.

5. Fees

Savings accounts are usually not costly. However, to maintain them you must pay few charges. The common forms are the monthly fee, ATM fee, low-balance penalty etc. All these fees add up and eventually diminish your income from the savings account.

Before deciding on a particular savings account, read carefully the terms and conditions or the information on the fee structure. Know what and how much the fees are? Evaluate a couple of accounts and select one that has the minimum total fees, keeping all other benefits constant.