It all started with the State Bank of India (SBI) cutting its Savings Account interest rate from 4% to 3.5%. This is for Savings Accounts that have a balance of up to Rs. 1 crore. The rate has been in effect since August 1, 2017. 3.5% for a Savings Account is the lowest rate in 6 years.
Following this move by SBI, the largest lender in India, Axis Bank also reduced the rates for its Savings Account. Axis Bank Savings Accounts having a balance of less than Rs. 50 lakhs will earn only 3.5%, down from 4% earlier. This came into effect on August 8, 2017. Following SBI and Axis bank’s rate cuts, HDFC bank and Yes bank have also cut their Savings Account interest rates. While Yes bank cut its rate from 6% to 5%, HDFC bank will pay 3.5% to its Savings account holders with a balance of less than Rs. 50 lakh.
There might be other banks that might consider cutting the interest rate for their Savings Account. This being the scenario, is there any way you can earn more interest for the money lying in your Savings Account? Of course, there is! Read on to find out.
There might be other banks that might consider cutting the interest rate for their Savings Account. This being the scenario, is there any way you can earn more interest for the money lying in your Savings Account? Of course, there is! Read on to find out.
The Good Old Post Office
Our Post Office Savings Scheme still offers you 4% per annum. The minimum investment for opening a Savings Account with the post office is Rs. 20. If you want an account with cheque facility, the minimum balance is as low as Rs. 500. You just need to make one deposit or withdrawal in 3 financial years to keep your Savings Account active. What about Debit Cards? You didn’t know! The post office will issue ATM or Debit Cards to Savings Account holders having the minimum prescribed balance on the day the card is issued. This is for all Core Banking Solution (CBS) post offices.
Additional Reading: Money Lying In Your Savings Account?
Want To Remain Loyal?
You really love your bank and don’t want to take your money anywhere else? Then, ask your bank if they will offer a sweep-in facility for your Savings Account. This facility allows you to sweep your idle funds into a Fixed Deposit and sweep it back into your Savings Account when you need it. This way your money will earn interest that is applicable to a Fixed Deposit. All such sweep-in Savings Accounts have a threshold limit. When that limit is reached, the rest of the funds will be swept into a Fixed Deposit. Some banks allow you to choose this limit. For example, if you choose a threshold of Rs. 15,000 and you deposit Rs. 20,000, Rs. 15,000 will remain in your Savings Account while the Rs. 5,000 will go into a Fixed Deposit. Note that banks usually make such transfers only in multiples as specified by them. For instance, ICICI Bank’s sweep-in facility allows you to sweep in funds in multiples of Rs. 5,000.
All such sweep-in Savings Accounts have a threshold limit. When that limit is reached, the rest of the funds will be swept into a Fixed Deposit. Some banks allow you to choose this limit. For example, if you choose a threshold of Rs. 15,000 and you deposit Rs. 20,000, Rs. 15,000 will remain in your Savings Account while the Rs. 5,000 will go into a Fixed Deposit. Note that banks usually make such transfers only in multiples as specified by them. For instance, ICICI Bank’s sweep-in facility allows you to sweep in funds in multiples of Rs. 5,000.
Additional Reading: Liquid Funds Vs Savings Account: The Liquid Funds Perspective
Looking For Lucrative Returns?
You want higher returns and liquidity is also important. Then, you need to go for a Liquid Mutual Fund. Liquid funds are those that invest in short term fixed-income securities such as Government bonds, commercial paper and certificates of deposit. The average return from such funds has been 6.8% in the past year. You can withdraw your money at any time without paying penalties. You also have the dividend and growth options for these funds. Isn’t that great? You can invest in these using your demat cum trading account. Unlike your Fixed Deposits, the long-term capital gains for these funds are taxed at 20% with indexation.
Here’s a tip. If you have too much of money lying in your Savings Account every month, consider using some of it to pay off your loans such as Home Loan or Personal Loan. Prepaying such loans will help you save tons of interest. A rupee saved is a rupee earned, after all. If you still think Fixed Deposits are the best place, go ahead.