How to open the best savings account before applying for a personal loan

Recently, Ronit Sharma, a mid-level executive, was contemplating on taking a Personal loan in Hyderabad after just stepping into the corporate sector. But he first decided to visit some online financial comparison websites to check the savings accounts offered by different banks and open one suitable for him. He decided to open an account with a bank that offered the best interest rate and lowest minimum balance requirement. Like a lot of other consumers, he focused on the right headline metrics but ignored a few other key parameters one should look at before making a choice.

It’s fair to say that a savings account is one of the least complicated products, and yet, most of us tend to focus on just one or two factors while opening an account as opposed to looking at the entire offering. It is quite similar to the phrase, ‘judging a book by its cover’. This inertia can be attributed to the difficulty faced by consumers while accessing the right information in a consumer-friendly language. 

Moreover, it can be challenging for consumers to break away from the ‘scared of financial products’ syndrome. So, if you, too, are contemplating taking a big financial decision like going for a Personal loan in Hyderabad, make sure to first look at the right factors to analyze for having a suitable savings account. This will give a solid foundation to your finances.

Interest Rate

When taking a Personal loan in Hyderabad or a Personal loan in Bangalore,  we compare interest rates of various lenders, right?

But what happens when it comes to a savings account? We usually associate interest rate benefits with investment instruments such as fixed deposits. However, with RBI’s deregulation of interest rates paid on a savings account, it makes sense to set aside some money in a bank account, more so because it provides access to ready cash whenever we need it.

-Since RBI regularized some years ago, there are quite a few banks who are offering attractive interest rates on savings accounts & also low rates on Personal loan in Bangalore. Some of them have conditions on balances, e.g. 6% interest offered on balances above Rs.1 Lakh and 5% interest offered on balances below that and so on. Hence, you need to overcome inertia and read the small fonts carefully.

Besides the interest rates on savings account balance, you should also consider the interest rate offered by banks on fixed deposits if it is an instrument you use for short to medium term investments. While you can open fixed deposits without having a savings account, customers usually prefer having fixed deposits with the bank they”ve savings/current account with for convenience.

Minimum Balance Requirement

When taking a Personal loan in Bangalore, you would come across not just interest rates but minimum & maximum loan amount that you can take, right? Neither you can avail of a loan below the minimum amount nor more than the maximum amount.

Similarly, for savings accounts, banks usually require you to maintain a minimum balance in your account. This becomes especially relevant if you have more than one savings account (or planning to have more than one) and the new account isn’t your salary account. The minimum balance requirement can range anywhere between Rs.500 and Rs.10lacs, depending on the nature of the account and bank you opt for. Should you fail to maintain a minimum balance in your account, you will be forced to pay the penalty that can range anywhere between Rs.100 -350 per month on a regular savings account. Penalty for non-maintenance of minimum average balance or MAB in case of premium bank account can be as high as Rs.600.

Hence it is recommended for you to consider opting for a minimum balance that you can comfortably comply with. Keep in mind that fixed deposit investments are usually counted towards the balance, so if you are planning to have fixed deposits, this may not be a concern.

Transaction charges-

Just like many of us overlook the processing charges when taking a Personal loan in Hyderabad, most of us tend to overlook enquiring about transaction charges levied by banks on cash transactions. Keep in mind that this is not a wise move. It is in our interest to read the fine print and find out about various transaction charges that you may have to take care of later on.

For instance, most banks allow a minimum of 5 free cash transactions through their regular savings account (deposits and withdrawals included). If you cross this threshold, you will incur transaction charges ranging anywhere between Rs.5 per Rs.1000. In addition to this, banks may also place a cap on the total value of free cash transactions in a month for replacing debit cards as well as for issuing additional cheque books. Hence, learn more about such sundry charges beforehand. Similar is the advice when taking a Personal loan in Bangalore. Its important to not ignore charges like processing and documentation fees, prepayment fees etc.

Check Debit Card benefits. 

We all know that debit cards come along with savings accounts. Banks usually offer different versions of these – while the basic ones are available free of charge, some of the premium ones come with an annual fee. Usually, the free option sounds better (doesn’t it!), but if you do spend through debit cards, do consider premium options as a lot of times debit card offers can easily give back more than they charge (in terms of the annual fee). The debit card offers have become very attractive across categories such as shopping, dining, fuel and utility payments, air travel etc.

Internet Banking, Mobile App

As technology continues to become an ingrained & essential part of our daily lives, the internet banking and mobile app experiences will continue to get better. If you’re a digital banking user, this becomes important. Most of the Banks are trying to get this right, but there are some who are more equal than others and have started offering complete digital experiences. Some of the  newer banks who have limited branch and ATM infrastructure would work harder to get this right. a

 Closest Branch, Number of branches

While the Internet and Mobile app would take up a larger chunk of customer services and experience, there will be such times as well when you need to visit a branch (like I had for attested Bank statements for Visa). You might also require a Bank relationship manager’s help for addressing certain issues or for seeking financial advice. It can be very much helpful if you knew how far is the closest branch from your place of residence or office.

 Similarly, it may not be possible for you to make an online payment for smaller cash transactions all the timeAlso; with RBIs restricting the number of free ATM transactions in other banks’ ATMs to three transactions per month, the non-availability of your bank’s ATMs may cost you extra bucks for withdrawing money from other bank ATMs.  Hence, it is important for you to consider the number of bank ATMs in and around places you frequently visit. This point is especially valid in the case of people residing in smaller cities and towns where all Banks may not have the physical infrastructure (Branches, ATMs).

In summary, just like for Personal loan in Bangalore, it is important to compare lenders and their product features. It is equally important to carry out in-depth research of various savings account options before zeroing in on any particular account type is very important and hence, take time out to read up, research and enquire about it in detail. It would not only reduce the cost of operating your account but would also earn you lucrative discounts.  

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