5
things to check in a bank account
Banks
are trying to woo customers for savings bank accounts because they are a source
of low-cost funds.
Five
factors to help you choose where you should open an account.
1 Minimum balance requirement
Banks require you to maintain a minimum balance in your account. This can range from as low as 1,000 in a public-sector bank to as high as 25,000 in foreign banks. The minimum average balance may be calculated on a monthly basis or a quarterly one, depending on the bank. If this balance falls below the required level, you are slapped with a penalty, which ranges from 350 a month to 1,000 per quarter. A high minimum balance can be difficult to maintain. Also, your money earns a mere 4-6% in a savings account, while it could earn a higher return elsewhere. However, competition for cheap capital is making banks sweeten their offers. Recently, the State Bank of India did away with the minimum balance requirement for its saving bank customers, and other banks may follow suit. Go for a bank that doesn’t force you to maintain a very high minimum balance.
2 Location and accessibility
Choose a bank with a branch at a convenient location. A centralised and well-connected location will obviously be more convenient than a branch in a far flung suburb. Banks are gradually moving to core banking where you can go to any branch and conduct transactions. However, not all branches are on the network currently, which is why the home branch still matters a lot. Similarly, the timings of the bank are also important. Some private banks start business at 8.30-9 am while PSU banks usually don’t open till 10 am. Again, some banks are open till late in the evening so you can take some time off after lunch or work to visit the branch. Even better are those banks that open on Sundays as well. The branch timing can be an important consideration for customers who don’t use netbanking or the even newer mobile banking services.
Choose a bank with a branch at a convenient location. A centralised and well-connected location will obviously be more convenient than a branch in a far flung suburb. Banks are gradually moving to core banking where you can go to any branch and conduct transactions. However, not all branches are on the network currently, which is why the home branch still matters a lot. Similarly, the timings of the bank are also important. Some private banks start business at 8.30-9 am while PSU banks usually don’t open till 10 am. Again, some banks are open till late in the evening so you can take some time off after lunch or work to visit the branch. Even better are those banks that open on Sundays as well. The branch timing can be an important consideration for customers who don’t use netbanking or the even newer mobile banking services.
3 How much does it charge?
Steer clear of banks that levy high fees for their services or charge you a bomb in penalties. Some banks charge you an annual fee for using a debit card but many offer this facility for free. PSU banks will charge a nominal 50-100 if a cheque bounces due to insufficient funds but a private bank could fine you 400-500. Compare the charges for various other services, such as issuing a bank draft, stopping the payment of a cheque, issuing a duplicate statement or passbook or certifying your signature for a third party. Some banks charge for issuing more than four chequebooks in a year. Others charge you even when you redeem credit card reward points. However, keep in mind that the high charges levied by private banks are a trade-off between costly but efficient service and the cheap but sometimes poor delivery given by PSU banks.
Steer clear of banks that levy high fees for their services or charge you a bomb in penalties. Some banks charge you an annual fee for using a debit card but many offer this facility for free. PSU banks will charge a nominal 50-100 if a cheque bounces due to insufficient funds but a private bank could fine you 400-500. Compare the charges for various other services, such as issuing a bank draft, stopping the payment of a cheque, issuing a duplicate statement or passbook or certifying your signature for a third party. Some banks charge for issuing more than four chequebooks in a year. Others charge you even when you redeem credit card reward points. However, keep in mind that the high charges levied by private banks are a trade-off between costly but efficient service and the cheap but sometimes poor delivery given by PSU banks.
4 Facilities on offer
Banking is more than just depositing cheques and withdrawing cash. You will eventually need other services, such as a locker for storing valuables, a demat account or investment services. If you often send cheques to outstation locations, find out if the bank offers at-par cheque books. At-par cheques are treated like local cheques anywhere in the country. Enquire about other services too. For instance, can you buy gold and mutual funds through your bank? Will there be an insurance adviser to guide you if you want to buy a cover for yourself? Does the bank offer a free credit card as well as a card protection plan?
Banking is more than just depositing cheques and withdrawing cash. You will eventually need other services, such as a locker for storing valuables, a demat account or investment services. If you often send cheques to outstation locations, find out if the bank offers at-par cheque books. At-par cheques are treated like local cheques anywhere in the country. Enquire about other services too. For instance, can you buy gold and mutual funds through your bank? Will there be an insurance adviser to guide you if you want to buy a cover for yourself? Does the bank offer a free credit card as well as a card protection plan?
5 Interest rates offered
Choose a bank that gives you the biggest bang for your bucks. The RBI has allowed banks to offer higher rates than the minimum 4% payable on a savings bank account. So, if you shop around, you might be able to get as much as 6-7% on your savings bank balance. Given that up to Rs.10,000 earned as bank interest is tax free, this can be a good investment as well. A better option, however, would be the autosweep facility that combines the liquidity of a savings bank account with the high interest rates of a fixed deposit. If your bank balance exceeds a threshold limit, the excess funds automatically flow into a fixed deposit to earn a higher return. But these funds remain available for withdrawal at any time.
Choose a bank that gives you the biggest bang for your bucks. The RBI has allowed banks to offer higher rates than the minimum 4% payable on a savings bank account. So, if you shop around, you might be able to get as much as 6-7% on your savings bank balance. Given that up to Rs.10,000 earned as bank interest is tax free, this can be a good investment as well. A better option, however, would be the autosweep facility that combines the liquidity of a savings bank account with the high interest rates of a fixed deposit. If your bank balance exceeds a threshold limit, the excess funds automatically flow into a fixed deposit to earn a higher return. But these funds remain available for withdrawal at any time.
Shipra
Sharma ETW120716
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