Change your savings bank account!
The savings bank account is a place where most of us leave a lot of balance. This is more by habit and inaction rather than any design. Traditionally all banks paid interest on the MINIMUM balance – by some stupid definition – of balance between 10th and 30th. It was difficult to calculate the correct interest, but since the rate was quite low, it did not matter.
Now that the interest rates are market driven will we change our bank account?
To me the answer is NO. A capital no. Because once you are with a bank all your financial transactions are tied to that account. So you will end up being held by the bank with at least 8-10 tentacles. I was going through my savings bank account and I found most of the transactions are automatically going to the bank account. I have about 100 credits annually apart from dividends COMING AS A DIRECT CREDIT.
In fact my banker told me, half in jest, ‘try changing the bank account’ – I CANNOT.
So if Kotak bank was to offer me 6% p.a. interest, how does it matter to me – I am too damn lazy to make changes (and I agree with the banker too – opening an account is too damn painful).
So what is the choice? Just transfer say Rs. 500,000 to a sb a/c with Kotak Bank and collect a higher interest. My main bank is unlikely to increase interest rates – but I will live with that.
I think if there is a sensible bank offering a nice rate, open an account and leave enough balance ….anyway if you are leaving Rs. 1 million in your bank – you might as well leave Rs. 300,000 in 3 bank accounts and earn a higher interest!
Karan
Has that min balance between 10th to 30th rule not changed sometime this yr? I think I read it somewhere interest on SB account is calculated on daily basis?
Young@Market
Hi Subra, I guess you have HDFC/SBI SB account….. And I agree completely on your view…
krish
I guess this decision of opening up the saving bank rates may be counter productive to most of the customers. Banks are using this as opportunity to earn more all in the name of offering higher rate.
Now AMB is introduced in place of AQB. New Penalities and service charges are introduced. Worse existing penalities and service charges revised steeply up. The small error from the customer or bank side can have significant dent to the customer balance. The fine print is never as important as today.
Atul
Hi Subra,
ICICI bank which has auto sweep facility.Amount in excess of Rs 10000/- goes into 1 year FD. FDs get automatically created/broken depending on fund addition/removal. Bascially one earns nominal savings rate on Rs 10,000/- and FD rate on remaining amount.
Regards
Atul
pravin
most of the banks profits come thanks to the fractional reserve system.the most fraudulent and devious scheme invented -ever,to thieve from the poor to give to the rich.
CodeRed
“Because once you are with a bank all your financial transactions are tied to that account. So you will end up being held by the bank with at least 8-10 tentacles. I was going through my savings bank account and I found most of the transactions are automatically going to the bank account. I have about 100 credits annually apart from dividends COMING AS A DIRECT CREDIT.”
I am also in the same situation and i agree with you sir.
Shrinivas
Anyway, the idea of freeing the SB interest rate will become clear within one or two years. It will become ZERO, like they do abroad.
Ashok
Idea: Open short term FDs with your existing bank. These can be opened online easily. For e.g. HDFC bank offers 7% interest on a 46 day deposit. It offers 7.75% interest on 181-196 day deposits. A few minutes a week spent online smartly can get you a far better returns than Kotak bank’s 6% SB rate.
Split and open multiple FDs so that you can break 1 or 2 with a minimum penalty, if the need arises within the 45 day period.
LuckyOye
@Shrinivas, I agree with you completely. The whole idea is to begin charging the customer for ‘safekeeping’ of his money. See, a bank is part of the ‘system’ and the ‘system’ atleast in India ensures that you never lose your money. So the bank, being part of the system should be able to earn profits on the money you deposit with it as a fee for its safekeeping.
Why should customer earn returns on his/her money with zero risk and full liquidity? Go invest in FDs (loss of liquidity) or shares/company deposits (risk).
Welcome to the Brave new world!
dipin
Hi,
I have 2 saving accounts. one in icici and one in kotak. i keep all my money in icici(almost 7lac) as i love the online faclity of this bank. kotak is zero. should i transfer about 5lac money in kotak and enjoy 6%. what is the stability of this bank? hope it wont run away some day.
and can anyone also explain about FD system for less days.. i dont know anything about it.