Savings Account Interest Rate: A Quick Guide
A savings account is a must-have financial tool for everyone. It is the first step to becoming financially secure. Not only do savings accounts provide optimal security, but reputed private sector banks like RBL Bank offer high interest rates too.
A feature-rich savings account eliminates the need to open multiple investment accounts since it provides FD-like returns and 100% liquidity.
Interest calculations in modern savings accounts often differ from traditional methods. Unlike older systems, modern accounts calculate interest daily based on your current balance, regardless of whether you make withdrawals through IMPS, ATMs, or regular debit transactions. Also know about what is imps, This means every transaction impacts your daily interest accrual, even if you don’t see it reflected immediately in your statement.
So, in this article, we’ll discuss all about the interest rates of savings accounts and how you can get the best savings accounts interest rate.
How the Savings Account Interest Rates are Calculated
Savings account interest rates depend largely on the benchmark rates set by the Reserve Bank of India (RBI). Suppose RBI increases the benchmark rates, banks also increase their savings account and Fixed Deposit interest rates, and vice versa.
For instance, RBL Bank offers interest rates of up to 6.50% per annum on savings accounts.
According to the new mandate of RBI (Reserve Bank of India), the savings account interest gets calculated daily based on your account’s closing amount. The accumulated interest gets credited to your account quarterly or half-yearly, depending on the type of your savings account and the terms of your bank.
Savings Account Interest Rate Calculator
How much interest can you get from the current fund you have in your bank? Use a savings account interest rate calculator to know what is the ideal amount to keep in a bank account.
Many well-known banks have a savings account interest rate calculator on their website. To use this, all you have to do is enter information, like the rate of interest offered by your bank and the average balance you keep in your savings account.
Once that’s done, the calculator will instantly show you the results. You can enter different sets of information to see what works best for you.
Example of Savings Account Interest Rates Calculation
Given below is the formula used during the calculation of savings bank account interest:
Monthly Interest (MI) = Daily Balance (DB) * (Number of days) * Interest (I) / (Days in the year)
Suppose a daily balance of a savings account is INR 200,000 and the bank provides an interest rate of 4% per annum. The accumulated interest will be:
200,000 * 30* (4/100) / 365 = INR 657.5
How You Can Maximise Benefits from Savings Bank Account
Even though there are various benefits to having a savings bank account, its modest interest rate is not considered one of them. But you can still make the most of your savings bank account by being more careful with the minimum monthly balance.
Maintaining the minimum balance will save you from paying penalty fees to the bank and give you steady interest.
Savings Account Interest Rates: Things You Must Keep in Mind
We’ve already discussed that bank credits interest rates quarterly or half-yearly. There are a few other things you should know apart from that.
- Even though the interest gets credited quarterly or half-yearly, its calculation is done daily. Therefore, you must maintain a steady amount in your savings account to get the desired amount as interest.
- Your accumulated interest gets compounded in each quarter, and the interest you’ve earned from the previous quarter adds to the new quarter’s balance.
- The same bank offers various savings accounts, and some banks have different interest rates for different savings accounts. Usually, the premium savings account holders get a higher rate of interest.
- To get more rate of interest, make sure to maintain a high balance in your savings account.
To Conclude
There are indeed other financial tools offered by banks that have higher interest rates to offer. But you remember that to get those benefits, you will need to manage more bank accounts efficiently.
A savings account is the kind of bank account that everyone has and uses regularly. Plus, it is way easier to maintain and does not include a whole lot of hassle and paperwork. Follow this guide to make the most of your savings bank account today and turn it into your earning tool.
