Regular savings accounts, traditionally called passbook accounts, are ideal if you plan to make frequent deposits and withdrawals. They require little or no minimum balance and allow you to withdraw money on demand. The trade-off for this convenience is that the interest you earn will be low compared with other savings plans.
You may receive a passbook that records deposits and withdrawals, but typically, you will get a monthly or quarterly statement in the mail. Commercial banks, savings and loan associations, and other financial institutions offer regular savings accounts.
Benefits of Savings Account:
Access and availability: Savings accounts are easy to open and you can withdraw and deposit money anytime (within certain specified limits) at ATMs or via 24-hour, online access, unlike long-term investment accounts. Many institutions will allow you to link your savings account to other accounts, like a Fixed or Recurring Deposit account, which can help you to avoid costly overdraw fees. This also allows you to quickly transfer funds from one account to another.
Protection: Government of India in 2020 has proposed to hike the bank deposit insurance in scheduled commercial banks to Rs 5 lakh per depositor from the current Rs 1 lakh. As per the RBI guidelines, deposits with all commercial banks and cooperative banks are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC). Only Primary Cooperative Societies are not covered under DICGC.
It’s a liquid asset: Savings accounts deal in cash, which means you don’t have to worry about selling investments or making other complicated moves to access your money.
Savings accounts accrue interest: Although interest rates have been low, you will still accrue interest over time with a savings account. The rates depend on the bank, but the national average is about 3-4 % per anum, with high-yield interest rates of up to 7 %.
Low startup requirement: Many savings accounts can be started for just Rs 500. Some banking institutions allow an account to be opened for as little as Zero balance, so you can begin saving with even a modest amount.
Automated bill payments: Many financial institutions allow bills to be paid automatically out of a savings account without being subjected to the withdrawal and transfer laws, helping you avoid late fees or missed payments.