Different types of savings accounts

A savings account is the most basic bank accounts. The savings bank account provides a place for people to keep their funds, receive payments, and make payments. A savings bank account holder gets services such as cheque book, internet banking, ATM card, debit and credit cards, etc. A savings bank account also receives payments, and the holder can set up auto debits, ECS for payments.

Many banks provide a savings bank account. A savings bank account can be opened either at the bank branch or online. Most banks have account opening forms online. With the changing requirements of people, the simple savings bank account has evolved into different types to suit the needs of people. The best bank for savings account is the one that meets your requirements thoroughly and 

Here are different types of savings account:

1. SavingsMax accounts:
This is a type of savings bank account for people who maintain high balances in their savings account. These accounts earn a higher rate of interest as compared to a basic savings account.

2. Women’s savings account:
This savings bank account is specially created for women. The account holder can get a preferential rate while taking loans. Some banks give women a higher withdrawal limit. They may get better offers on other products like debit cards and other products.

3. Children’s savings account:
These are best for inculcating a savings habit among children. These accounts come with a debit card cum ATM card and all other facilities like a regular savings account. However, the account has limits on daily spends and is linked to the parent or legal guardian's account.

4. Senior citizen account:
A senior citizen bank account provides a preferential rate of interest to senior citizens. Along with that, it offers other benefits such as insurance cover and preferential rate and discounts on the bank's products.

5. Basic Savings Bank Deposit Account (BSBDA):
This is a basic savings account for people from economically poor sections of the society who can’t meet the minimum balance needs of a savings account. This account is a zero balance account. It comes with all the other features of a bank account such as cheque book facility, ATM card, Passbook etc.

6. BSBDA small account:
This savings bank account is the BSBDA account with a maximum cap of Rs. 50,000 on the account balance. This means the balance in the account cannot exceed Rs. 50,000 at any point.

7. Family or Group savings account:
These accounts provide savings bank account facility for the entire family. They come with benefits such as a higher interest rate and greater withdrawal limit depending on the bank.

8. Government/Institutional savings account:
This is a type of a zero balance account for institutions to receive payments and make payments.

9. Government scheme beneficiary account:
Sometimes, banks require individual accounts to be opened for people who have to receive any direct transfers from schemes by the Government.

How to calculate fixed deposit interest?

A fixed deposit is one of the most popular forms of investment today. It is easy to set up a fixed deposit both online as well as offline. Most people only find out the interest that they will earn on the fixed deposit once the fixed deposit has been created. Lenders indicate the maturity value of the fixed deposit on the FD advice.

There are two ways to calculate the fixed deposit interest:

• Use a fixed deposit calculator:
An FD calculator uses the following inputs to calculate the maturity value and the interest earned:

o Principal amount
o Rate of interest
o Tenure

Most fixed deposit calculators also consider other factors such as the interest payout on the fixed deposit. For example, if the depositor selects the reinvestment method for interest, then the interest is capitalised periodically, thus compounding the interest. On the other hand, for other interest options, i.e. monthly payout, quarterly payout, maturity payout, the interest is calculated using the simple interest formula. Typically, reinvestment of interest leads to a marginally higher interest earning as compared to other modes.

After you input these three values, the FD calculator gives you the maturity value of the fixed deposit along with the interest breakup. Some calculators even give you the financial year breakup of interest, clearly showing the interval at which the interest is capitalised.

• Manual calculations:
Fixed deposit interest can be calculated using the simple interest formula for every option except for reinvestment of interest. The simple interest formula is:

Interest = Principal x Rate of Interest x Tenure

Lenders generally calculate the interest on a fixed deposit on a daily or monthly basis. So, using this formula will lead to an approximate figure very close to the actual amount of interest earned on the fixed deposit.

For reinvestment of interest, manual calculations can get a little complicated since the reinvestment depends on the lender and business practices may change. However, unless the principal amount is enormous, using the simple interest formula gives an approximate value of the interest earned, even for the reinvestment option. 


However, using an FD interest calculator is very helpful since it can accurately tell you the interest earned. By using this tool, you can find out your earnings in advance and choose between investing in a fixed deposit or deploying funds elsewhere. An FD interest calculator is an extremely simple tool to use and is freely available online especially on lenders websites.

What is IMPS?

With the evolution of digital banking, newer modes of fund transfers have arisen. Using cheques for payments has almost become obsolete with the introduction of several different digital banking techniques. NEFT and RTGS are two common modes of transfer of funds from a bank account. However, NEFT and RTGS are handicapped by the fact that these transfers happen during banking hours and on days that banks are in operation. For 24x7 transfers, a newer way is to use IMPS.

IMPS or Immediate Payment Service (IMPS) is an instant payment method where funds are transferred between two bank accounts immediately. This service is available 24x7. But the best advantage of IMPS is that it is primarily available on mobile phones. This has made it very simple to transfer funds using mobile phones. IMPS can be used to transfer funds from person to person or from person to a bank account directly.

Procedure for using IMPS:

1. The first step is to register for Mobile Banking of the respective bank. This will help with IMPS transfer. The registration is done using the customer’s mobile number and MMID (Mobile Money Identification Number). The MMID is a 7 digit number that identifies the bank that is offering the IMPS transfer and the customer.
2. To make an IMPS transfer, you need to add an IMPS beneficiary. This can be added via NetBanking or Mobile Banking through the bank’s mobile banking application. The details required are:
• Bank account number
• IFSC code of the bank
• MMID of the beneficiary
• Mobile number of the recipient
3. The bank may send a One Time Password (OTP) to authenticate the addition of the beneficiary. The beneficiary usually gets added in 30 minutes to a couple of hours.
4. Each bank has their limits on transfers to the beneficiary after addition. Some banks have limits only for the first 24 hours, while others have limits for the first few days. Post that, third party transfer limits applicable to NEFT will apply to IMPS transfer.

IMPS is an affordable means of fund transfer. Different banks set their charges for IMPS, and in most cases, the IMPS charges depend on the value of the transaction. Before making an IMPS transfer, check the costs on the bank's website. Most banks display the charges on their IMPS web pages.

One of the best advantages of IMPS is that the funds get credited to the beneficiary immediately, regardless of it being a holiday for banks. However, for an IMPS transfer to go through, the person must have an adequate bank balance. 

What are the best investment products in India?

When it comes to investing funds to build a corpus, there is a fair bit of confusion among people with regards to the best investment options in India. There are several different investments, each with a different return. However, the best investments are those that provide inflation beating returns consistently over the long run and manage to also save tax.

Here is a list of best investment products in India:

1. Mutual funds:
This includes both equity mutual funds and debt mutual funds. Debt mutual funds have a fixed and guaranteed return and are a great avenue to park funds for the short term. Since it is a mutual fund, the money is liquid and can be converted to cash at any point of time. Equity mutual funds grow based on the market movements. However, they are the best tool to grow capital in the long run. Investing in special tax saver mutual funds gives a deduction under Section 80C of the Income Tax Act up to Rs. 1,50,000.

Investing in mutual funds is the best option for people who want to enter the market but don’t have the right expertise. Mutual funds are professionally managed and an investor can take advantage of the fund manager’s expertise while making his investment.

2. Equity shares:
Equity shares are units of capital issued by a company. Investing in equity shares, especially in reputed companies can be an excellent strategy to grow your capital. Investing in equity shares also gives a return in the form of dividends which are tax free. Equity shares can be purchased from the secondary market or via an Initial Public Offer (IPO) which is the first time a company issues shares to the public.

3. Saving Bonds:
These are bonds issued by the Government of India. They come with a  coupon rate of 7.75%. Since they are issued by the Government, they are a risk free investment option. The interest on these bonds is taxable.

4. Capital Gains Bonds:
These are bonds issued by the National Highways Association of India (NHAI) or the Rural Electrification Corporation (REC). These bonds are excellent for investment to reduce the capital gains tax on transfer of assets. However, from AY 20-21 or FY 19-20, this deduction is available only to people who transfer houses or plots of land. No other asset transfer will be allowed for taking an exemption.

5. Inflation indexed securities:
These securities are issued by the Reserve Bank of India. The coupon rate on these investments is 1.5% more than the consumer price index. This investment is only available for retail investors. These securities are only available via SBI, HDFC Bank, ICICI Bank and Axis Bank.

It is possible to make an online investment to invest in any of these products. To make an investment, the first step is to open a demat and trading account with a reputed company. The best way to ensure you grow your capital to meet your targets and goals is to avail professional investment services of a financial planner. This way, your capital will be managed professionally and you can ensure it is deployed in the best investment options in India to meet your goals.

How is health insurance beneficial?

The cost of getting good quality medical treatment in India keeps rising with each passing year. The sedentary lifestyle among most of the people in the country has also given rise to lifestyle diseases. In most cases, medical treatment for illnesses leaves people’s savings significantly depleted, which then affects future savings and investments.

When it comes to India, buying life insurance to cover the life of an individual is common. However, the awareness and penetration of health insurance are woefully inadequate. Health insurance in India is not considered a necessity but often overlooked as something that is merely an expense that does not give any return. 

What is health insurance?

A health insurance policy covers the insured against the cost of medical treatment. Different health insurance plans include a different type of medications, for example, a critical illness health insurance plan will cover treatment for the specified critical illnesses. A cancer health insurance plan will reimburse the insured for spends made for cancer treatments. 

A health insurance policy can either be a mediclaim policy, which covers the cost of hospitalisation only or a broader health insurance policy which includes pre and post hospitalisation expenses, medical consultation expenses, day care procedures etc. 

The basis of health insurance plans is reimbursement of medical treatment spends. The nature of spends that are reimbursed and the percentages of spends depends on the health insurance policy. Health insurance plans have a sum assured up to which reimbursement of expenses is done.

How is health insurance beneficial?

1. Protects savings:
One of the best advantages of health insurance is that it protects a family’s savings. In the absence of health insurance, the cost of medical treatment would have been met out of the family’s savings. With a health insurance policy, several of the medical treatment costs are met by the insurance company.

2. Covers other expenses:
Depending on the plan, the health insurance policy can cover different types of costs apart from hospitalisation spends. Some of these expenses are:
• Ambulance charges
• Diagnosis spends
• Consultation spends
• The second opinion spends
• Repatriation of remains
• Ayurveda/Unani/Homeopathy treatments
• Organ donor expenses
• Hospital cash allowance
• Home nursing allowance
• Physiotherapy spends

3. Cashless treatment:
Most insurance companies tie up with hospitals to provide cashless treatment. In cashless treatment, the insurance company directly pays the hospital the sum required for treatment. It saves a lot of effort and time for the patient and his family.

4. Can insure family together:
It is possible to take a family floater health insurance policy to cover the entire family. This reduces the hassles of buying individual policies and also ends up being cheaper depending on the number of people insured.

5. Income tax deduction:
Buying health insurance plans can give you an income tax deduction under Section 80D of the Income Tax Act. The deduction is Rs. 30,000 for insurance policies for self, spouse, and dependent children and it goes up to Rs. 50,000 for senior citizen parents, or senior citizen policyholder.

What is the Sukanya Samriddhi Account?

The Sukanya Samriddhi Account is a Government-backed savings scheme, especially for the girl child. This scheme allows the parent or the guardian to build a fund for the girl child, which can be used once she reaches 21 years of age. 

Under the Sukanya Samriddhi scheme, an account is opened in the name of the girl child with a deposit that has to be made every year. The interest earned on the Sukanya Samriddhi account is the highest among all the small saving schemes of the Government. Currently, the account earns interest at 8.6% for the year 2018-19, with interest compounded on an annual basis. 

Features of the Sukanya Samriddhi account scheme:

• The account can be opened for a maximum of two girl children except in case twins or triplets are born.
• The account has to be opened from the time the girl child is born till the time she reaches 10 years of age. The Sukanya Samriddhi account cannot be opened once the girl child crosses 10 years of age.
• The minimum contribution per year is Rs. 250 whereas the maximum contribution is Rs. 1.5 lakhs. The first deposit is a minimum of Rs. 1,000
• There is a deduction available for contributions made to this account under Section 80C up to Rs. 1.5 lakhs.
• The maximum duration for which payments need to be made in the account is 14 years. After that, no more contributions are required till the account matures. The account keeps earning interest on the accumulated balance till then.
• A Sukanya Samriddhi account matures when the girl child reaches 21 years of age.
• The interest earned on Sukanya Samriddhi scheme is exempt from Income Tax. The withdrawal from this scheme on maturity is also exempt.
• This scheme is available only for resident girl children. Non-resident girl children cannot have this account opened in their name even if their parents are Indian residents. If the residential status of a girl changes, then the parents have to inform the bank within a period of the 1-month following which the account will be closed.

Documents required to open a Sukanya Samriddhi account:

• Birth certificate of the girl child
• Identity and address proof for the parents or legal guardian
• Photographs of the girl child and the parents or legal guardians
• For an adopted child, the parents will have to give a certificate explaining the relationship between the parent and the child.

The Sukanya Samriddhi scheme is a beneficial scheme that provides a way to build a corpus for the girl child’s education and wedding expenses.

Debit card: Top 5 reasons to get a debit card now

It is a type of card that is similar to carrying cash. While using a debit card for payments, the amount automatically gets deducted from your bank account. Usually banks issue ATM cards that also function as debit cards.

The card is linked to your account. Debit cards in India are usually issued by Visa, MasterCard or the local RuPay. Just like a credit card, a debit card also has a 16 digit number and a CVV. Debit cards function on a PIN that has to be set by the debit card holder. Some banks allow debit cardholders the flexibility to choose their limits for transactions. Debit card holders are intimated about their spends via SMS generally. The current debit cards come with chip-based security. Some banks also give free insurance cover if the cardholder incurs a particular amount of spends each month.

A debit card is a useful card to have. Here are the top 5 reasons to get a debit card now:

1. Convenience:
One of the best reasons to get a debit card is the convenience it gives. Debit cards also function as an ATM card. There's no need to carry any cash because the debit card can be used to withdraw some money as well from ATMs.

2. Cashback points:
Credit cards earn points, but debit cards earn cashback points which can be redeemed for cash back in the bank account. Each debit card has a specific lisft of transactions that give cashback points.

3. Chip protection for added safety:
With the new rules for debit cards in place, the old magnetic strip cards have been discontinued and replaced by chip security cards. These cards compulsorily have the chip verification system, which is inherently more secure.

4. Offers and discounts:
A debit card holder can get several discounts on a range of items such as utility bill payments, airline ticket bookings etc. These discounts depend on the type of online debit card that the holder applies for.

5. Can be used for international transactions:
An international debit card is a debit card that can be used to make purchases on foreign websites. The debit card will use either a pin based verification or an OTP based verification to authenticate the transaction. Note, the debit card can be used on international websites. It may not necessarily work outside the country.