The very first Bank Account that most people open is usually a Savings Account. It lets you deposit and securely store your funds while letting you earn interest at specific Savings Bank interest rates. While the interest is relatively low, you can opt for clever ways to earn more. Let us understand these interest rates and some tips for earning more interest on your Savings Account.
About Savings Account interest rates
Savings Account interest rates are the interest you earn based on your daily closing balance. Your bank may credit the accumulated interest quarterly or monthly, depending on its discretion. This rate of interest usually varies across banks. Banks may also periodically revise this interest rate based on the RBI mandate. If you are looking for a Savings interest calculator and want to calculate the interest, the general formula to calculate the monthly interest is as follows:
Monthly interest = Daily balance in the Savings Account x Number of Days x Rate of Interest per annum/Total number of days in a year
Ways to earn more interest
You can earn more interest in your Savings Bank Account using the following ways:
- Maintain a high monthly average balance
Nowadays, account holders usually need to maintain a low average monthly balance in their Savings Accounts. However, you can earn more interest on your Savings Account if you maintain a high monthly average balance. This may be because banks follow an incremental rate of interest. The power of compounding also works better with a high average balance.
- Budget your monthly expenses and use auto-sweep facility
Building a budget will help you understand your monthly expenses and find various avenues to save money. Once you know your monthly expenses, you can use the auto-sweep facility. It allows you to automatically transfer excess money in your Savings Account to a Fixed Deposit. Idle funds swept out to an FD enable you to enjoy a higher rate of return. The money can also be swept back into your Savings Account during an emergency.
Banks usually let you set a limit on your Savings Account. They transfer the extra cash to your FD when surplus funds come in.
- Open multiple accounts
If you have just one Savings Account, you rely on it for all your financial needs. This may deplete the savings on which you may have earned interest. Opening multiple Savings Accounts and setting specific goals for them helps. Today, you can choose from various Savings Accounts when opening one.
For example, you can open a Regular Savings Account, a Women’s Savings Account, a Senior Citizens’ Savings Account, etc. You can even prefer opening a Zero-Balance Account online.
Conclusion
Now that you know the different ways, you can consider them when trying to earn more interest on your Savings Account.
