A bank account is an excellent way of saving, investing, and growing your money. Banks now provide a wide range of accounts to meet the diverse demands of their customers, including savings, current, fixed deposits, recurring deposits, and NRI accounts.
Each bank account has its own distinct qualities. We will cover the different types of bank accounts and the best ones for your needs.
7 Types Of Bank Accounts
#1 Checking accounts
A checking account is designed for everyday use. Most checking accounts come with debit cards and checks that can be used for regular purchases. Checking accounts are popular due to their accessibility and ease of use. These accounts do not pay interest on funds held in them. A current account is mostly utilised by businesspeople, firms, companies, and public entities. Unlike most bank accounts, current accounts are not used for investment or saving purposes.
- Anytime withdrawal facility
- Availability of an overdraft facility
- No transaction limit
- Can deposit cash or cheques at different bank branches.
- Account holders who conduct large financial transactions receive special incentives and benefits.
#2 Savings accounts
A savings account is the most common type of bank account. It allows you to store and manage your finances. Savings accounts earn low–interest rates but allow the consumer to withdraw money at any time. However, you should be aware of the withdrawal limits, as most savings accounts limit you to 6 withdrawals a month. Due to the low rate of interest and withdrawal limits, savings accounts are best for what the name implies ‘saving.’ Whether for a car, a house down payment, or just for anything.
- Safety of funds
- High liquidity
- Auto sweep facility
- Automatic debits for payments
- Convenient fund transfers
- Any individual, either single or jointly, can open a savings bank account.
#3 Recurring bank accounts
A recurring bank account is used by those who desire to save a fixed amount of money on a regular basis. It is best for those looking to earn a high rate of interest within a short period of time. Every month, a fixed sum is put in a recurring deposit account, and the total amount is refunded with interest at the end of the specified period. The interest rates vary depending on the bank. Since it is a deposit account, recurring bank accounts permit no withdrawals before the maturity period.
- High-interest rate
- No penalty if you miss your payment
- Start with a minimum of Rs 2000/month
- Save for as low as 6 months and a maximum of 10 years
- Simple documentation.
- Best for short-term goals
#4 Fixed deposit accounts
In FDs, the amount will be fixed for a specified term in exchange for the set interest rate. You cannot withdraw your funds before 5 years or more, since you will not profit from the interest rate. It is a one-time deposit and takeaway. If necessary, the depositor can request that the fixed deposit be closed early by paying a penalty. The interest rate paid on a fixed deposit varies depending on the quantity and length, as well as from one bank to the next.
- Assured rate of returns
- Tax threshold for interest
- Loan against an FD
- Flexible tenure
- Easy liquidation
- Invest once and you can rest easy knowing your money is safe.
#5 Salary accounts
Your salary account is one of the many types of bank accounts you opened because of a tie-up between your company and the bank. At the start of the payment period, all employees’ salaries are credited to this account. Employees can select the type of salary account that best suits their needs. The bank in which you have a salary account also has reimbursement accounts where your allowance and reimbursements are transferred.
- Zero balance account.
- No monthly average Balance charges.
- Employee reimbursement account.
- Auto sweep facility.
- Free debit card with exclusive benefits
#6 Demat accounts
Demat accounts allow investors to hold shares and securities electronically. It permits you to keep track of all of your investments in one spot, whether they are mutual funds, stocks, bonds, or exchange-traded funds. Overall, Demat accounts assist investors in trading and investing in equity shares on the stock market and converting share certificates from physical to digital form.
- Easy accessibility
- Easy rematerialization/dematerialization of securities
- Helps facilitate the opening of your trading account
- Ease of carrying out transactions
- Saving stamp duty
- Easy money on the liquidation of shares
#7 NRI accounts
There are various bank accounts available to Indians and Indian-origin persons residing abroad. These are known as overseas accounts. They contain three categories of savings and fixed deposits.
a) Non-resident ordinary (NRO) savings accounts
NRO accounts are rupee accounts. When NRIs deposit funds in these accounts, the funds are converted into INR at the current exchange rate. NRIs can keep the money they earn in India or abroad in NRO bank accounts. Rent, maturities, and pension payments, among other things, can be sent abroad via NRO accounts. The interest generated in these bank accounts is subject to taxation.
- Handle finances in India
- Interest on fixed deposits
- Invest in mutual funds, IPOs, etc.
- Link your NRO Account to a PIS Account and trade in Indian stocks.
- Convenient banking.
- No need to maintain high balances.
b) Non-resident external (NRE) savings accounts
NRE deposit accounts are the same as NRO accounts in that the funds are stored in INR. Any funds put into these bank accounts are converted into INR at the current exchange rate. These accounts, however, are just for storing your foreign earnings. The funds, both principal and interest, are transferable. However, the interest received on these bank accounts is not taxable in India.
- A Term Deposit has a minimum term of 12 months and a maximum term of 10 years.
- The interest rate on this deposit is determined by the Bank on a regular basis.
- The interest earned under this scheme is tax-free in India.
- A/c with a zero balance can also be opened.
- Credits / Debits are governed by Exchange Control Regulations.
c) Foreign currency non-resident (FCNR) accounts
A foreign currency non-resident (FCNR) account is a foreign currency term deposit account. This account can only be opened in one of the nine currencies permitted by the RBI. The interest rate on FCNR accounts differs depending on the bank and the currency of the deposit. Banks only pay interest after a year of deposit. The interest earned on this account is tax-free in India.
- Interest is exempt from income tax.
- Can have two or more NRIs as joint account holders.
- Both principal and interest are freely repatriable.
- FCNR term deposits pay interest after the first year. Following that, it compounds interest every six months.
- Rupee loans against funds in FCNR accounts can be made available.
There are various types of bank accounts in India. Each of them serves a different purpose and can be opened by submitting an application and documentation. Make sure you check the bank timings, particularly during holidays and weekends.
To learn more about the different types of bank accounts, visit the Piramal Finance website now.