Savings Account Advantages and Disadvantages

Savings Accounts are the most common and primitive types of accounts one can find in a bank. Via a savings account, an account holder can deposit money and keep them safe, the deposited money will generate interest which can be withdrawn accordingly.

You might see people discussing why they would prefer a savings account over current or joint accounts in a bank? But, what are the factors which make savings accounts special, and what are the steps to open a savings account in a bank?

Here, we will discuss the advantages and disadvantages of a savings account and tell you the steps necessary to open savings account online.

Advantages of Savings Account

Accessibility and availability

Opening a savings account is really easy. It does not need a lot of formalities that one might incur while opening a joint or super saver account. And the withdrawal of funds is really simple. Savings accounts can also be linked to other accounts to avoid costly overdraw fees.

Safety

The main reason people prefer to keep their money in banks rather than stuffing them up in a secure locker in their house is for the optimum levels of security a bank provides. Savings accounts provide complete protection of your hard-earned money.

Helps you earn interest

Whenever you deposit and keep money in a savings account, the bank provides a certain interest on the deposit. If you have a significant amount of money at your disposal, you can easily earn a living.

Low minimum balance options are available

Some banks offer really minimum balance requirements for a savings account. In India, many public sector banks will ask you to retain only Rs 1,000 as a minimum balance. This minimum balance requirement changes from bank to bank. Some private banks like ICICI have a very high balance requirement, around Rs 10,000, but nowadays one can easily open a student account or a zero balance savings account via online portals of various banks.

Promotes Automatic Payment of Bills

Many financial institutions allow bills and other monthly expenditures to be paid directly from a person’s savings account, helping them to avoid fines and penalties on late submission of dues.

No lock-in period

Savings accounts are not subjected to any lock-in period and you can switch in between savings accounts as often as you may fancy.

Debit Card facility

We all know the importance of plastic money in today’s modern world. Savings accounts provide a debit card facility that allows you to make cashless payments easily.

Disadvantages of Savings Account

Penalty for failing to retain the minimum balance

If someone fails to maintain the minimum required balance then the savings account can be subjected to fines which are deducted from your deposited money. A long span inability to maintain a minimum balance can also cause the cancellation of your savings account.

Low rates of Interest

Most banks don’t provide significant rates of interest on savings accounts. This rate of interest is lowest among public sector banks like SBI, UCO, etc. ICICI and Canara. On the other hand, private banks provide a higher rate of interest but they require a higher amount as a minimum balance for their savings accounts.

Withdrawal Limits

There are always limits to how many times you can withdraw from your savings account. Most banks allow an account holder to withdraw money five times a month from ATMs. If you need emergency funds after you have exhausted your limit, you might be charged extra. Zero balance savings account may have even tighter withdrawal limits.

Fluctuating rates of interest

Savings account interest rates are variable and can change according to market conditions. If any financial emergency occurs, you may not get any interest on your deposited money.

Now, consider you know all there is to know about savings accounts. You have made yourself thorough about the pros and cons and now you want to open a savings account from the comfort of your home.

So, here are the steps to open savings account online:

Choose your preferred bank. Many banks like ICICI and Axis have online portals via which you can create your savings accounts.

Provide Contact details. This will require identification proof, birth certificate, phone number, and other credentials.

Select between types of savings account you want - Single or Joint?

Accept terms and conditions.

Submit your application.

Most applications get their approval within a week, provided all documents are justified.