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Types of Savings Accounts: Which One is the Best for You?

A savings account makes for a great investment option as it helps you earn interest on your money. There are several different types of savings accounts that have different features depending on what they help you achieve. They differ in the benefits they offer – their features, terms, interest rates and eligibility criteria.

What are the types of savings accounts? Let’s explore ten different types of savings accounts, along with their features and benefits!

10 Types of Savings Accounts

Savings accounts differ based on what they offer and are designed to do. Let’s learn about the different types of savings accounts:

1. Zero Balance Savings Account

With a zero balance savings account, you can spend the last penny without worrying about paying any maintenance fees! Usually, when you open a savings account, the bank has set a specific amount limit that needs to be maintained. For example, some banks have the requirement of maintaining a minimum amount of ₹5,000. If you don’t maintain it, you’re liable to pay the maintenance fee. In contrast to this concept, a zero-balance account does not mandate you maintain a minimum amount in your account. Officially known as the Basic Savings Bank Deposit (BSBD), users are encouraged to save more with this account.

Anyone who wants to opt for a model that’s more like a regular savings account but doesn’t want to go through the hassles of maintaining a minimum balance can open a BSBD. There are no restrictions on age or income for opening a zero balance savings account. According to the RBI, there’s no limit to the number or the value of deposits made monthly in your BSBD account. However, only four withdrawals, including ATMs, are allowed monthly in most cases. You need to remember that you cannot open any other type of savings account in the same bank you have your BSBD account. If you have an existing savings account in that bank, you are required to shut it down within 30 days of opening a BSBD account.

If you are searching for a zero balance savings account that gives the maximum interest rate in India, Freo Save is an excellent option! Freo Save offers you a zero balance digital savings account and earn up to a 7% interest rate on your savings and other benefits like safe and secure banking facilities, insurance on balance, and 100% guaranteed data security! Moreover, after opening a savings account with Freo Save, you unlock other Freo credit and shopping options like app-based credit line MoneyTap, and the “Shop Now, Pay Later” module from Freo Pay.

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2. Regular Savings Account

A regular savings account is perfect for you if you are searching for a basic savings account that gives you interest on your savings to achieve your short-term financial goals! This is the type of account you initially begin with when you start your financial independence journey.

To open this type of savings account, you need to make a minimum initial deposit. The value of this deposit differs in urban, semi-urban, and rural areas. Different banks have different initial deposit rates, so check. Similarly, depending on the bank and area (urban, semi-urban, and rural), you must maintain a minimum monthly balance for most regular savings accounts. You earn interest rates that differ from bank to bank. There are limits to how many monthly transactions and withdrawals you can make; again, this will vary from bank to bank. Usually, banks allow six withdrawals before enforcing penalties.

Depending on the bank you are opening your regular savings account with, you get additional benefits of doorstep banking services, instant money transfer, debit card, phone, and net banking, SMS alerts, statements, and more.

3. Women’s Savings Account

Meant for today’s independent woman, a women’s savings account keeps in mind the different needs of a modern woman. If you are a woman looking to open a sole or joint savings account to earn interest on your savings, this type of savings account is perfect for you!

To open one, you need to make a minimum initial deposit. The deposit amount differs depending on the bank and area (urban, semi-urban, and rural). Moreover, you need to maintain a minimum monthly balance. Generally, this balance is ₹10,000 for urban and ₹5,000 for rural areas. Some banks even offer women access to lower processing fees, cashback offers, home banking services, cash delivery and pick-up, cheque delivery, unlimited withdrawals, accidental cover, and other benefits usually not seen in a normal savings account.

4. Kid’s Savings Account

This type of savings account is specifically designed for children. Besides savings funds for your child, opening a kid’s savings account is perfect for teaching your child how to manage money, save for the future, and learn other vital aspects of personal finance. Every bank provides different interest rates and benefits. It’s essential to look through and decide which one is the most beneficial to you and your child. The most interest rate a bank can offer is up to 6%. Several banks provide benefits like free passbooks, e-statements, debit cards, and insurance.

A parent of a minor below 10 can open and operate it on their child’s behalf. But, if the minor’s account is opened between the ages of 10 and 18, your child can manage the account independently. And once the child turns 18, the account will become inoperative and can be converted into a regular savings account.

The minor’s savings account is subjected to several restrictions, and fewer features are available. For example, features like internet banking, cheque books, ATMs, or debit cards can be available, but they will come with restrictions. Most banks would only allow inter-bank funds transfers, and a minimum balance needs to be maintained. Some banks even have a daily spending limit ranging from ₹1,000 to ₹5,000. You may even be imposed a certain limit for total debits from the account.

5. Senior Citizen’s Savings Account

The Indian government has offered a Senior Citizens’ Savings Scheme (SCSS) that aids the elderly in saving for their retirement while getting paid quarterly interest. Individuals above 60 can open this account and get the endless benefits of long-term financial security with attractive features. Several other advantages include:

  • Tax benefits
  • Premature withdrawals
  • Opening more than one account by yourself or a joint account with your spouse
  • Adding nominations while opening the account or after opening an account
  • Five years maturity period that can be extended by three more years

6. Family Savings Account

Family members with their savings accounts in the same bank can club them together and turn them into a family savings account. Family members include spouses, kids, parents, in-laws, grandparents, grandkids, and siblings. A minimum of two accounts and a maximum of six are allowed. Many banks offer different benefits, such as discounts on gold lockers, Demat accounts, debit or credit cards, etc., at a lower interest rate.

Here, the maintenance will be on a group level, so you don’t have to maintain a minimum balance on every single account. The fees are collected from the family’s head account if the minimum balance is not met. And if they don’t have enough funds, the fees will be collected from other members’ accounts. Any member of the group can leave at any time. If the family head wishes to leave the family account, they will need the consent of every family member. Once it is granted, the family savings account will be dissolved.

7. Salary-based Savings Account

Only an employer can set a salary account to credit your salary into it every month. Employers usually tie up with certain banks to open salary-based savings accounts for their employees. And since it is a type of savings account, account holders earn interest on the amount maintained.

The interest is usually counted daily and deposited into your account quarterly. You don’t have to maintain a minimum balance. If the account is not credited with salary for more than three months, it is converted into a regular saving account with a minimum balance requirement. Account holders can take advantage of online fund transfers, phone and net banking, cheque book, debit card, and easy access to loan and investment services.

8. Health Savings Account

A health savings account (HSA) is meant to offer you health insurance cover while also providing savings to fund your future medical expenses. It is an excellent alternative to traditional health insurance plans. It acts like a regular savings account, where you can deposit money and earn interest to use later for health-related expenses.

With an HSA, you can cover 100% of your routine medical expenses like clinic visits, lab tests, and prescription-based medicines. Some banks offer an interest rate of up to 5% and also cover pre and post-hospitalisation costs, day-care treatment, cashless transactions, and more! In case of hospitalisation or emergencies, you can settle a reimbursement through an HSA. This savings account is great for people not covered by a regular health insurance plan.

A minimum balance must be maintained in the account. Anyone eligible to open a traditional savings account can open an HSA. However, this requirement may change for different banks. Transaction and withdrawal limits differ from bank to bank. Generally, these limits range from ₹10,000 to ₹1,00,000.

9. Student’s Savings Account

It’s never too early or late to begin saving, and banks encourage students to start saving with a student’s savings account. A student savings account is perfect for cash-strapped students because it offers easy access to cash and low fees with less to no minimum balance requirement.

Since this type of account is meant for youth, banks prioritise the digital experience. There are certain daily withdrawal limits. Some banks even provide benefits such as free cheque books or ATM cards.

10. Business Savings Account

While many business owners opt for current accounts with no daily withdrawal limitations to handle their business needs, you also have the option to choose a business savings account. Commonly, a business savings account is used by businessmen who actively put aside some money in a savings account. They can use this account to create a safety net and meet any unexpected expenses like emergencies or tax payments.

As your business grows, this accumulated money will be helpful in the long run in case you need to spend on project expansion, marketing, etc. So, instead of resorting to borrowing, business owners can just dig up from their business savings account and fund these necessities. Moreover, payment of taxes gets easier. For example, businesses have daily, weekly, monthly, quarterly, and annual expenses. Among these, the daily, weekly, and even monthly ones are easy to budget since they stay on top of your mind. But the quarterly and annual expenses like income tax can hit your cash reserve if not budgeted for correctly. People often use a business savings account to endure heavy income tax payments so that their other working budget is not affected.

How to Choose the Right Type of Savings Account?

To figure out what type will work best for your needs and situation, you can start by getting the answers to these questions:

  • How much interest will I earn from this savings account?
  • Does this account require a minimum deposit amount?
  • Will I gain tax benefits with my savings account?
  • Am I going to have 24×7 accessibility?
  • Do I have to pay penalties for withdrawals?
  • Are there any fees for opening a savings account?
  • Will this account satisfy my financial goals?

Once you have the answers to the above questions, it will be easier for you to understand which of the 10 types of savings accounts discussed above will work best for you.

Freo Save – One Savings Account for All!

Amid all the different benefits offered by the different types of savings accounts, a higher interest rate is what everyone searches for ultimately. Freo Save is proud to be India’s first zero-balance digital savings account to offer up to a 7% interest rate annually! You get this alluring benefit regardless of being a woman, salaried employee, senior citizen, or child.

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