6 essential Savings Account terms to know

When you are looking to tackle inflation and aim for a better lifestyle, your first move should be to open a Savings Account and knowing the various rules, charges and terms and conditions associated with it. This will enable you to make smart choices and unlock all the perks your account offers.

Essential Savings Account terms

1. Minimum balance

Many bank accounts have a minimum balance requirement. This means you need to maintain a specific amount at all times. Failing to do so can attract penalties. You need to be mindful of this if you withdraw or make payments often. Use your mobile app or Net Banking portal to keep track of your balance.

2. Annual percentage yield (APY)

APY is the rate of interest you earn on your Savings Account balance in a year, usually ranging from 3-4%. You might also come across the term 'accrued interest', which is the interest amount earned via the APY. It is usually compounding interest calculated periodically (often quarterly or monthly). The interest rate may fluctuate.

3. Withdrawal or transaction limit

Although the funds in your Savings Account are always accessible, banks may impose daily or monthly transaction limits. The charges associated with exceeding these limits vary based on your bank and account type. Understanding these restrictions is crucial, as a daily limit could prevent large transactions from going through.

4. ATM network

Many banks have their own ATM network, which means you can get free withdrawals and other services from these ATMs. While there is a charge for transactions from ATMs of other banks, beyond a certain number. Knowing the ATM network of your bank is important, especially if you rely more on ATM transactions, so that you can save on ATM transaction charges.

For instance, the Axis Bank AMAZE Savings Account levies no charge on any domestic transactions, including ATM withdrawals from any bank's ATM. It is a zero balance account that offers welcome benefits and rewards of up to ₹11,000. It also includes a free Debit Card and chequebook facilities.

5. Deposit insurance

You might have heard about a safety net provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a specialised division of the RBI. Even if the bank fails, it insures all deposits, such as savings, fixed, current, recurring, etc. Each depositor in a bank is insured up to a maximum amount of ₹5,00,000. This includes the principal and interest amount in your Savings Account, along with any linked Fixed Deposits.

6. Compounding interest

Many of you may not understand how powerful compounding is and how it grows your savings over time. Simply put, compounding means you earn interest not only on the principal amount but also on the accumulated interest from the previous period. For instance, if your balance is ₹100, and you have earned ₹3 in the last quarter. This quarter, you'll earn interest on ₹103 and not just on your principal amount.

Also Read: Top 9 benefits of having a Savings Account

Conclusion

Knowing the basics of Savings Account terms is vital for managing your money wisely. When you are familiar with these concepts, you can be clear of extra fees and make sure your money is working for you. So, take the time to get acquainted with these terms — it's the key to financial peace of mind!

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.