Everyone should have accounts in at least 2 banks. There are many reasons for this. The important ones are listed below.
- It is always a good idea to have an account with another bank to use if an account is locked. Sometimes, a bank account can be locked through internet banking, or due to a lost debit card, or because of unauthorized transactions. If this happens, the bank will not accept your transactions until the problem is resolved. Having an account with another bank during this period will be very useful. Sometimes, if you think that you can start over after a problem occurs, it may not be possible. Sometimes, even if you ask the opinion of the new bank and the old bank, they will not allow you to open an account.
- In India, money in a bank account is only insured up to Rs 1,00,000. If you have more than Rs 1 lakh in your account, it is better to keep it in two or three banks. If you do this, you will get your money back even if the bank collapses.
Those who have accounts in cooperative banks and small banks should be especially careful. - A bank is an institution that sells a service. Just as we collect price information from many institutions when we buy any other service, we also need to collect price information from many institutions for banking purposes. For example, if we are taking a loan to build a house, we need to find out exactly how much the application fee will be from many banks and what percentage of interest will be. Even half (0.5%) percent interest can make a big difference when taking a loan for 20 years. If we already have an account with the banks, it is very easy to get this information. Having an account with many banks will be very useful when taking a loan and when taking a credit card.
- Now that there are so many mobile payment applications and services, the chances of someone hacking our account are very high. Therefore, giving permission to these mobile applications to our important accounts will increase the risk. For this, it is better to open a new bank account, deposit only the amount required for internet transactions in that account, and link the mobile applications to it.
What is a Savings Bank Account?
A savings bank account is an account opened in a banking institution to carry out financial transactions. Through a savings bank account, we can access services such as debit card, credit card, check book, internet banking, etc. To get these services from most banks, you need a savings account there.
Savings bank accounts have insurance coverage for amounts up to one lakh rupees. If there is more than one lakh, the money will be lost if the bank collapses. If the account is opened in a cooperative bank, you should specifically ask whether the bank has this insurance coverage.
Savings bank accounts earn a minimum interest of 3.5 percent. Some banks offer higher interest rates.
Money can be withdrawn from savings bank accounts at any time. Money can be withdrawn at any time through ATM using a debit card. Similarly, money can be transferred at any time through internet banking. Money can also be withdrawn by going to the bank directly during the bank’s business days. There will be limits on withdrawing money through ATMs and directly going to the bank branch. This limit will vary for each bank. If we use a system above the limit, we will have to pay a penalty.
Most bank accounts have a minimum balance. This is the minimum amount that must be maintained in the account. If it falls below this, the bank will charge a penalty.
Similarly, some banks charge fees in various ways such as annual account maintenance fees and debit card fees. It is better to ask what these are before opening an account and open a bank account with the lowest fee.
Savings bank accounts should not be used for long-term investments. The interest rate on this account will not grow our money along with the inflation rate. Since the interest rate on savings banks is below the inflation rate, the value of the money in the account will continue to decrease. A savings bank account should be used as a stepping stone to using other banking systems.
No Frills Account
This account is useful for those who only manage a small amount of money. The no-frills account allows a zero balance. So there are no penalties for not maintaining the minimum balance.
There will be restrictions on the amount of money that can be kept in no-frills accounts and the financial transactions that can be made from the account in a year. As per the 2019 rules, if the balance exceeds ₹50,000 or financial transactions exceed ₹1 lakh in a year, the account will no longer be considered ‘no-frills’.
Salary Account
Salary account or salary account is available only to people who work for a monthly salary. The salary will be deposited directly into this account.
These accounts have more leeway than others in terms of minimum balance requirements, number of ATM usages, etc. If you are eligible for a salary account, you should definitely open one. It will come in handy in the future.
Sweep-in account
These accounts are sometimes called Multiplier accounts. These accounts provide the liquidity of a savings account and the high interest income of a fixed deposit.
For this, a fixed deposit account is linked to a savings account. If the balance in the savings account exceeds the limit we set, the excess amount will be transferred to the fixed deposit account.
When withdrawing money, we can withdraw from the amount transferred to the fixed deposit. The amount transferred last to the fixed deposit will be the first to be withdrawn. By doing this, the amount deposited initially will earn interest for a longer period.
For example, suppose the account balance limit is Rs 5,000. If we deposit another Rs 10,000 and bring the account balance to Rs 15,000, the amount above Rs 5,000, i.e. Rs 10,000, will be transferred to the fixed deposit account. In this way, all the amounts above Rs 5,000 will be transferred to the fixed deposit.
Now, when withdrawing money, if we need more than Rs. 5000, we can withdraw it from the amount lying in the fixed deposit account. There will be no penalty for this.
This is the best account for keeping an emergency fund.
Bank Fixed Deposit
What is a bank fixed deposit?
A bank fixed deposit is a deposit of money in a bank for a specified period at a specified interest rate. It is one of the safest investments. As long as the bank exists, the money will be returned at the specified rate at the end of the specified period.
As the risk of the investment increases, the return or interest rate will increase. As the risk decreases, the interest rate will decrease. Bank deposits are very safe. Therefore, their interest rates will be lower than other schemes available in the market.
What is the tenure of a bank fixed deposit ?
Bank deposits are available in various tenors. Whenever the bank needs money, the bank will make deposits available to the public for the period of time for which the money is needed. Generally, the tenor of bank deposits is one year, two years, three years, and five years.
If you suddenly need money, you can stop the fixed deposit and withdraw money from the bank. But if you do this, you will not get the stated interest rate. You will only get the bank’s minimum interest rate. If you stop the term, you will lose interest. Other than this, there is usually no other major penalty.
What is the minimum annual deposit required for a bank fixed deposit?
The minimum amount varies from bank to bank. Generally, banks accept amounts starting from Rs. 1000 and above as fixed deposits.
How many times should one invest in a bank fixed deposit every year?
Fixed deposits can generally be made in a single installment. The next time you make a fixed deposit, it will start as a new investment.
How much can be invested in a bank fixed deposit every year?
There are no limits on the amount you can invest. You can invest any amount you want.
How to start a bank fixed deposit?
All banks accept fixed deposits. We can start by visiting a bank branch or online at banks where we have an account.
Who can open a bank fixed deposit?
Anyone can open a bank account. Most banks will allow you to open an account if you have address proof and a PAN card.
What is the return on bank fixed deposit investment?
Different banks charge different rates. Sometimes, if the bank is in dire need of money, the rate may be slightly higher.
After calculating tax:
Income from bank deposits is subject to income tax. You will have to pay interest on the deposits at your annual income tax rate.
From the ICICI Bank rate above, you will get 6.9% interest on a one-year deposit.
If you pay 5% tax, your 6.9% interest rate will become 6.56% after tax.
If you are a 20% tax payer, your 6.9% interest rate will become 5.52% after tax.
If you are a 30% tax payer, your 6.9% interest rate will become 4.83% after tax.
What is the fee for bank fixed deposit?
Normally, there are no fees for bank fixed deposits.
Other benefits
There is a scheme under which you can get income tax exemption if you make a bank deposit for five years. The Income Tax Department can give tax exemption under Section 80C up to Rs 1,50,000. But these deposits must be kept for five years. The income on the deposits is subject to income tax.
Do you want to invest in a bank fixed deposit?
Bank deposits generally yield returns below the inflation rate. If you invest money in a bank for long-term goals, when the time comes to meet your goals, the money often doesn’t have the value you expected.
Bank deposits should only be used to store money that is needed immediately or to keep an emergency fund.
