Money, money, money! We all love to have it, but managing it can be a headache. When it comes to opening a bank account, two popular options are a salary account and a savings account. If you’re wondering what the difference is between a Salary Account and a savings account, then you’ve come to the right place. In India, around 63% of people prefer to use a savings account to manage their finances, while the remaining 37% use salary accounts for receiving their monthly salaries and managing their day-to-day expenses.
With such striking statistics, to help you make an informed decision about which type of account is right for you, it becomes imperative to delve into the intricacies of Salary Account vs Savings Account.
So, without further delay, let’s explore the differences between salary accounts and savings accounts, but first, we’ll start with some basics.
Salary Account: What is it?
As the name suggests, a salary account is designed to receive your monthly salary from your employer. It is usually a zero-balance account, which means that you do not need to maintain a minimum balance. This makes it easier for you to manage your finances, especially if you’re just starting out in your career.
Here are some primary features of a salary account:
- Zero-balance account
- Higher withdrawal limit
- Debit card with additional benefits
- Unlimited ATM transactions
- Free passbook and cheque book
- Free online banking and mobile banking
Savings Account: What is it?
On the contrary, a savings account is a type of deposit account that you can use to save your money and earn interest on it. You can deposit money into your savings account at your convenience, and earn interest on the balance in the account. This interest rate varies from bank to bank and can range from 2.5% to 7% per annum.
Below are some primary features of a savings account:
- Minimum balance requirement
- Interest on the balance
- Limited withdrawal limit
- Debit card with basic benefits
- Limited ATM transactions
- Free online banking and mobile banking
- Free passbook and cheque book
Salary Account vs Savings Account: Understanding The Key Differences
Now that you know what a salary account and a savings account are, let’s take a closer look at the key differences between the two:
- Minimum Balance Requirement
As we mentioned earlier, a salary account is a zero-balance account, which means you do not need to maintain a minimum balance in the account. However, a savings account may have a minimum balance requirement, which means you could need to maintain a certain amount of money in the account at all times. If you fail to maintain the minimum balance, you may be charged a penalty fee.
- Interest Rates
A salary account may or may not earn interest on the balance, while a savings account does. The interest rate on a savings account can vary from bank to bank and depends on the amount of money in the account. The interest earned on a savings account is calculated on a daily or monthly basis and is credited to the account periodically.
- Withdrawal Limit
A salary account usually has a higher withdrawal limit than a savings account. This is because salary accounts are designed for day-to-day expenses and to receive your monthly salary. On the other hand, savings accounts are designed for saving money, so the withdrawal limit is usually lower than a salary account.
- Debit Card Benefits
A salary account usually comes with a debit card that has additional benefits such as cashback on transactions, discounts on shopping, and free movie tickets. However, a savings account comes with a basic debit card that has limited benefits.
- Charges and Fees
Most salary accounts do not charge any fees for online banking, mobile banking, or ATM transactions. However, savings accounts may have some charges and fees for these services. These charges and fees can vary from bank to bank, so it’s important to read the terms and conditions before opening an account.
- Cheque Book and Passbook
A salary account usually comes with a free cheque book and passbook, while a savings account may have these services available at an additional cost. However, some banks may offer these services for free on savings accounts as well.
- Account Closure
If you leave your job, your salary account may be converted into a savings account or closed. Whereas, a savings account can be closed at any time as per your convenience.
Which One Should You Go For?
Now that you know the differences between salary accounts and savings accounts, you might be wondering which account is best suited for you. The answer to this question depends on your financial goals and requirements.
If you’re just starting out in your career and want to manage your monthly salary and day-to-day expenses, then a salary account might be the best option for you. It is a zero-balance account with higher withdrawal limits and additional benefits on the debit card.
Contrarily, if you have some savings and want to earn interest on it, then a savings account might be the right choice. It has a minimum balance requirement and limited withdrawal limit, but it also earns interest on the balance, which can help you grow your savings over time.
Final Words
In a nutshell, if you’re looking for an account to manage your monthly income and expenses, a Salary Account is your go-to option. But, if you’re aiming to save some extra cash and earn interest on it, a Savings Account is your best bet.
Before signing up for either account, it’s crucial to read the fine print and understand the fees and charges associated with it. This way, you can make a well-informed decision and select the account that fits your financial requirements like a glove.
Remember, managing your finances is important, and choosing the right bank account can make a big difference in achieving your financial goals. So, choose wisely and start saving today!