When selecting a savings account, what factors do you consider? The primary objective of a savings account is to help you grow your savings over time, so it’s essential to prioritise features that maximise your interest earnings. While a high interest rate is a key factor, did you know there are other ways to boost your savings?
How to earn more interest on a savings account?
Here are a few things you can do to maximise your interest earnings through your savings account:
- Regularly deposit funds: Even if you have the benefit of a zero balance account, make sure you make regular deposits to earn interest and allow compounding to boost your savings over time.
- Choose a high-yield savings account: A high-interest savings account offers a higher interest rate as compared to regular savings accounts. This allows your funds to grow at a faster pace and may help hedge inflation too.
- Take advantage of compounding: Opt for accounts that compound interest monthly or quarterly rather than annually. This helps your savings grow faster as you earn interest on both your principal and accumulated interest.
- Opt for a smart-sweep-like option: Look for a savings account that offers an auto-sweep feature. For instance, the IndusInd Bank Indus Multiplier Max Savings Account comes with the smart-sweep option. Here, any account balance above the threshold of ₹20,000 is automatically converted into a Fixed Deposit (FD) in multiples of ₹1,000, allowing you to benefit from higher FD interest rates.
- Utilise discounts and cashback benefits: Look for savings accounts that offer additional benefits like discounts and cashback. For example, the IndusInd Bank Indus Delite Savings Account offers the Delights Debit Card with 5% cashback on fuel, entertainment, dining, and OTT expenses. You can also enjoy discounts on Swiggy and Bigbasket by using your Delights Debit Card for purchases. These benefits indirectly help you increase your savings, which can then earn interest over time.
Factors affecting savings account interest rates
While there are key steps that you can take to earn higher interest through your savings accounts, there are other factors that are beyond your control:
Factors affecting savings account interest rates
The RBI’s monetary policy
The Reserve Bank of India’s benchmark interest rates such as the repo rate can influence savingsaccount interest rates. The RBI also determines the amount of funds that banks must hold inreserve, which affects the savings account interest rates offered by banks.
Inflation
As inflation rises, the purchasing power of money reduces, thereby leading banks to increasetheir savings account interest rates during periods of high inflation.
Prevailing market conditions
In phases of strong economic growth, with an increase in spending and investment, the demandfor loans increases. To keep up with this demand, banks increase their savings account interestrates.
The bank’s financial performance and business strategy
Depending on their financial performance and business strategies, banks might decide to increase their savings account interest rates to attract more customers.
To sum up
You can follow the above-mentioned steps to earn more interest through a savings account. Make sure to opt for a high-yield savings account, regularly deposit funds, and open a savings account with a smart-sweep option to maximise your interest earnings.
