Maximizing savings account interest for Indian savers
What's the story
In the current low-interest rate environment, knowing how to squeeze every last drop of interest from savings accounts has become a key skill for Indian savers. With banks dangling a confusing array of rates and terms, it's crucial to cut through the noise and make smart decisions. This article will uncover actionable tactics to help you boost your savings returns without sacrificing convenience or security.
Interest calculation
Know your bank's interest calculation method
Indian banks use different methods to calculate interest on savings accounts, which can impact how much you earn. Most banks use the daily balance method, but the frequency of interest crediting varies - some banks credit it quarterly, while others do it monthly. Understanding this can help you strategically time your deposits and withdrawals to earn the most interest.
Rate comparison
Compare rates across banks
The interest rates you earn on your savings account can greatly differ based on your bank selection. While established/larger banks tend to offer lower rates, ranging from 3% to 4%, smaller or newer banks often use higher rates to draw in customers - occasionally reaching 6% or 7%. By regularly comparing these rates and considering a switch or spreading your savings across several banks, you can maximize your returns.
Auto-sweep
Utilize auto-sweep facilities
An auto-sweep facility links your savings account to a fixed deposit in the same bank. When your savings exceed a predetermined threshold, the excess amount is automatically swept into a fixed deposit, earning you higher interest compared to a regular savings account. It offers the best of both worlds - the convenience of a savings account and the higher interest of a fixed deposit.
Tech savvy savings
Leverage technology for better rates
Numerous digital-only banks and fintech companies are able to provide competitive interest rates on online savings accounts, thanks to lower operational expenses compared to traditional brick-and-mortar branches. These digital platforms not only offer higher rates compared to traditional banks, but also feature user-friendly apps that make managing your finances a breeze.
Repo rate awareness
Monitor changes in repo rate
The RBI changes the repo rate, which influences bank interest rates on deposits and loans. Being aware of these changes can help predict trends in savings account interest. When hikes are announced, it's a good idea to keep an eye out for increases in savings account rates at different banks, as they often follow the central bank's policy changes.