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Getting the best from your savings account

Larissa Fernand

A bank savings account is still an all-time favourite even though you earn just 4.5 per cent per annum. After all, the most convenient factor is liquidity. You can take out the money anytime. And if you still want to keep substantial amounts in your savings account, here are some tips to get the best out of it.

• Deposit cheques or amounts before the 10th of the month. Interest is computed every month on the lowest amount between the 10th to the end of the month. Even if you withdraw money for a day, the lowest amount is taken into account.
• If you have accounts in more than one bank ask them how the interest rate is computed. The Reserve Bank of India allows interest rates to even be computed at quarterly intervals. This will be more beneficial than a half-yearly or annual rate.
• Opt for deposits which give you higher rates but operate just like a savings account. In this way you are assured of a higher return and liquidity. Breaking part of the deposit may or may not attract a penalty from the bank. Even if it does, the total return that you get will be higher than 4.5 per cent. Moreover, you may even be given an ATM card and a cheque book facility for this deposit. So for all practical purposes, it is a savings account. Just check with the bank whether each unit is a rupee or you have to break your deposit in multiples of say 10, 100 or 1,000.
• If you want to be a little more adventurous but still rank safety as a primary concern, then maybe you could try a money market fund or a gilt fund. Since these funds have the RBI go ahead to provide cheque-writing facilities, liquidity too is provided. But this is not all that convenient as it is made out to be. For one, the cheque can only be accepted in specific banks which have a tie-up with the mutual fund company. The cheque can only be written in certain denominations with limits imposed. The fund will also require you to maintain a minimum amount with it, the balance which will be available for the cheque-writing facility. Also, writing a cheque on a mutual fund account means it is a redemption and that brings in the tax angle. The plus point: you will get a higher return than 4.5 per cent annually.

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