6 ways to make your savings account work for you

6 ways to make your savings account work for you

Probably every one of us has a savings account in a bank. But still many of us are oblivious about how to utilize the benefits of savings account.

Let us understand, in what ways, can we make our savings account work for us!

1.     Earning Interest

   In 2011, RBI deregulated the interest rates and    allowed the banks to set their own rates on            savings account.

   Since then, bank pays interest on basis of your     daily end of day account balance.

   Generally, interest is credited on half-yearly        basis to savings account. However, some banks  have their own schedule viz: - monthly or        quarterly.

 For eg: Mr A. has 50,000 in his account for 15  days, 10,000 for 10 days and 8,000 for 5 days in  his savings account in XYZ bank that offers 4%   interest on savings account.

Calculation of monthly interest rate

Daily interest rate = 4/365/100 = 0.010959/100 = 0.00011

Monthly interest = 0.00011 [(50000*15) + (10000*10) + (8000*5)]

                                = 97.53425 Rs

Some of the banks claim to be offering a higher interest rate (6-7%). However, this is mostly applicable on balance above Rs.1 lakh and a lesser interest rate will be applied on balance below this amount.

For e.g a bank, ABC offers 7% p.a on your savings account that has 1.5 lakh daily balance. Then a lower interest say 4% is applicable on your balance of Rs. 1 lakh and 7% is applicable on only Rs. 50000 of your total amount.

2.     Sweep transfer facility

Some banks offer a facility where amount above a stipulated balance in your savings account is automatically transferred to linked fixed deposit (FD) account. Here, you enjoy the benefit of higher FD rate on such amount transferred. This facility provides higher returns with liquidity. In case there is shortfall for a transaction in savings account, the same is fulfilled by the required amount from the linked FD. Swept FDs are generally broken on LIFO (Last in first out) basis to prevent premature interest loss.

This facility is useful for individuals who can keep a track of and remembers maintaining average balance in the savings account as excess amount above stipulated balance will keep on sweeping into FD accounts and the account may be penalized with non-maintenance charges.

3.     NEFT/RTGS/IMPS

You can benefit from your savings account by activating the instant and quick fund transfer facilities.

NEFT is National Electronic Fund Transfer wherein individuals can electronically transfer funds from one bank to any other bank in the country. Transactions of upto Rs. 2 lacs can be done via NEFT with minimal charges.

RTGS is Real Time Gross Settlement wherein funds are transferred on real time and order-by-order basis. Large value transactions above Rs. 2lacs can be done via RTGS 

IMPS is immediate payment service available 24*7 and throughout the year irrespective of weekends or holidays. IMPS is immediate fund transfer facility that can be availed using Mobile, PC, Laptop or tablet.

4.     Security benefits

Pradhan Mantri Suraksha Bima Yojana – You can avail the security of accidental death benefit of upto Rs. 2 lacs under this scheme. All you have to do is fill the prescribed forms and provide auto-debit instruction of premium of Rs. 12/- p.a from your savings account.

Pradhan Mantri Jeevan Jyoti Bima Yojana - This scheme provides the security of life insurance of Rs. 2 lacs , which is payable to the nominee on demise of the insured. This facility is available at an annual premium of Rs. 330/- to be auto debited from your savings account.

These schemes are to the individuals as long as they hold savings accounts in the bank.

 

 

5.     Cashing LPG subsidy

  LPG subsidy is one of the subsidies provided by the government  through DBTL (PAHAL) scheme, in which the LPG subsidy    amount is directly credited to your savings account. To avail this    subsidy, all you have to do is link your AADHAR number to your  savings account by filling prescribed form or through net banking.  Next step is to link your AADHAR card to your LPG consumer  number.

6.     More Savings through tax exemption

Interest amount of upto Rs. 10,000/- from savings account is exempted from tax under section 80 
TTA of Income Tax Act. So, if your FD interest is crossing the tax exemption mark, then it would be wise to park amount in your savings account. This way you can earn the benefit of elevated interest rates of savings account while saving on tax.

Click here to Know how you can e-verify your income tax returns with the help of your savings account and ATM card.