How do Savings Account interest rates work?
Bank Accounts are the best way to secure your savings, earn interest, and use the funds for financial emergencies. You get a range of options for women, children, employees, and senior citizens. Some offer higher interest rates than regular ones, enabling you to maximize your savings over time.
Before approaching the bank, you consider factors like Savings Account interest rates, additional benefits, and charges. Interest plays a significant role in choosing a partner bank. If you are a smart saver, you are always hunting for ways to maximize your interest earnings. But how much interest do you earn?
How do Savings Account interest rates work?
Interest calculation
Banks calculate interest on the daily closing balance. They credit it to your account monthly, quarterly, or half-yearly. You can calculate it using the formula Monthly interest earnings = Daily Balance x Interest Rate x Number of Days / 365. Once the bank credits the interest, it adds to the principal amount, and you earn interest on the aggregate amount moving forward.
Maximizing interest earnings
Once you deposit your funds in a Savings Account, your earnings grow automatically based on the interest rate. What if you want to earn higher interest rates? Here are some tips on maximizing your interest earnings:
Maintain a high monthly balance
Banks calculate the interest payable based on your daily account balance. The higher your balance, the more you earn as interest. Even if you have a Zero Balance Account, maintaining a high balance increases the returns while keeping them secure.
Use idle funds effectively
The sweep-in and sweep-out benefits ensure the idle funds get swept out to a Fixed Deposit, bringing you higher return rates. The saved money gets swept back to your account during an emergency. You can set a limit on your account and transfer surplus funds to your FD using the Banking app.
Sweep-in facilities
Linking your Fixed Deposits with Saving Bank Accounts can offer higher interest earnings. You can avail of the sweep-in facility and get higher interest returns. Feel free to withdraw money without breaking your FD and facing penalty charges.
Consider age-based accounts
Different accounts are available for every individual. They may have a higher interest in Saving accounts than the standard ones. You can also calculate and compare the rates using the interest rate calculator and receive better returns.
Invest in market-linked instruments
When you have an adequate balance in your account, you can use the monthly interest credit for other investments. For example, you can use Systematic Investment Plans and get the interest income deposited every month. The income earned through the Bank Saving Account interest rate offers higher returns through funds schemes actively managed by experts.
Knowing your Savings Account interest rates is essential when planning your budget. After all, it makes you aware of your savings and helps you plan your expenses.
