A savings account is ideal for receiving or transferring money, payments towards utility bills, remittances, and withdrawals, to list a few. Typically, it is used to set aside funds for certain purposes, such as to address emergencies or a down payment on a home.
The bank pays interest to a savings account holder, which is referred to as Annual Percentage Yield (APY) on the balance amount. Usually, the interest rate is set by the bank or credit union and depends on the type of account an individual opens.
However, the savings account could come with restrictions. For example, a bank or credit union may limit the withdrawals to six per statement period. In case an individual crosses this threshold, it could invite a fee.
A step-by-step process to open a savings account
An application is to be suitably submitted in this regard. An individual could have the option to apply in person, by phone, over email, or in online mode.
Submission of details and documentation: An individual is mandated to submit a government-issued ID, which could be an Aadhaar card, Permanent Account Number (PAN) card and driving licence, document for date of birth, mailing address, email address, phone number, and two latest passport-size photographs.
Opt for a single or joint account: An individual has the option to open a savings account for themselves or a joint account with another person, which could be either with a spouse or child. In case one opens a joint account, the co-signer will usually required to be present and submit their details.
Minimum initial deposit: A few savings accounts ask for a minimum deposit to open an account. Usually, banks accept cash deposits, while most online savings accounts let individuals deposit cheques or transfer funds from a linked bank account.
Furnish the application: The bank or financial institution will review the information submitted. After the application is suitably approved and the savings account is opened, an individual can set up direct deposit or automatic transfers from the checking account.
Types of savings account
Standard/ Regular Savings Accounts: In such savings accounts, the interest rate varies between 2.75% and 2.90%, depending on the available balance and the banking institution.
High-Yield Savings Accounts: These are typically offered by online banks or financial institutions. Generally, high-yield accounts come with a bit higher APYs than standard savings accounts.
Specialty Savings Accounts: Such accounts are either designed to address specific savings goals or for a certain type of individual. For instance, children’s and student savings accounts are designed to inculcate the habit of saving among children, teenagers, and students. As compared to high-yield savings accounts, the interest in speciality savings accounts is generally low.
Similarly, a few other speciality savings accounts are designed to save money aside for retirement, health care or holiday shopping. There are low or no maintenance fees involved. However, the bank could restrict who can use the accounts and when they can initiate withdrawals.
The process to open a high-yield savings account
An individual can earn a higher interest rate in such accounts. Before going in for opening such an account, an individual should act with due diligence and try to find the best rate available. It is important to note the minimum deposit requirements, monthly fees, and any balance requirements to earn the full APY.
A few of the online banks tend to offer the best rates. However, some financial institutions are known to offer highly competitive rates, too. An individual is required to submit an online or in-person application and deposit the initial balance.
Choosing the savings account
Focus on the financial goal and mull over the type of account that would be suitable for the money and lifestyle. First and foremost, it is important to identify the reason for saving.
A few of the other crucial considerations include the interest rate, minimum balance requirement, fees, accessibility of the institution, and tax benefits provided, if any.
Finally, it is important to note that every bank or financial institution has its system for evaluating account eligibility. However, some of the common reasons for being denied a savings account could be related to instances when an institution is unable to verify an individual’s identity or in case such a person owes overdue fees on another account with the same bank or financial institution.
In case an individual is denied a savings account, the bank will provide a notice explaining the specific reason. If an individual finds out that negative marks on the consumer reports are the reason for the denial, they are required to check the reports for errors and dispute any inaccurate information in this regard.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.
