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How Does Interest Work on A Savings Account?
Posted on Tuesday, August 16th, 2022 | By IndusInd Bank
What factors do you consider before you get a savings account? Interest rates, charges, and perhaps the additional benefits. If you are like most people, you’re getting a savings account to park your funds. Naturally, the interest rate of the savings account plays a huge role in choosing a partner bank. And if you’re a smart saver, you’re looking for ways to maximize your interest earnings too.
Sure, choosing a banking partner offering high savings accounts interest rates can ensure good returns.
But how much interest will you earn? How do savings account interest rates work? Read on to find out.
Saving Account Interest Calculation
As per the recent Reserve Bank of India (RBI) mandate, banks calculate interest on the closing balance daily. They further credit interest in your account half-yearly, quarterly, or monthly.
Here is how to calculate your savings account interest earnings.
Monthly interest earnings = Daily Balance X Interest Rate X Number of Days / 365
Now consider this example,
If from 1st Jan to 5th Jan, your daily balance remains Rs 2 Lakhs, and the savings interest rate is 4% per annum, you will earn:
Rs 2,00,000 X (4/100) X 5 / 365 = Rs 109.59 interest
On 6th Jan, you deposit Rs 60,000, and with no other transaction till 10th Jan, you will earn:
Rs 2,60,000 X (4/100) X 5 / 365 = Rs 142.50 interest
So, in 10 days, you will earn a total interest of Rs 252.09.
The bank repeats this process daily and credits the amount every three months or half a year. You also get the benefit of compounding or earning interest on interest. Once the bank credits the interest, it’s added to the principal amount, and you earn interest on the aggregate amount moving forward.
It’s clear that once you deposit your funds into a savings account, it automatically grows your earnings based on your bank’s savings account interest rates. But what if you want to get even higher savings account interest? Well, here’s how you do it.
Maximize Your Interest Earnings
Here are some tips to earn higher interest rates on your savings account.
1. Maintain High Monthly Balance
As stated earlier, banks calculate the interest payable based on your savings account balance daily. Naturally, the higher your balance, the higher your interest earnings. So, maintain a high monthly balance. Even if your savings account has a low or zero minimum balance requirement, maintaining a higher balance increases the returns on your deposit.
2. Get a Savings Account with IndusInd Bank
If you want to get the highest interest returns, it makes sense to choose a banking partner offering better interest rates from the get-go. At IndusInd Bank, we provide best-in-class interest rates on a savings account. We also offer a plethora of savings accounts tailored to each individual’s needs. So, you can maximize benefits and your savings.
3. Avail Sweep-in Facility
Linking your fixed deposits with our savings bank accounts can give you higher interest earnings. So, avail of the sweep-in facility, and get higher interest returns. Withdraw money anytime without breaking your FD or facing penalty charges.
Final Words
Knowing your savings account interest is crucial when budget planning. After all, it tells how much your savings will earn and helps you plan your future expenses.
Looking for a savings account with interest rates high enough to give your money a hedge against inflation? Turn to IndusInd Bank. We provide best-in-class interest rates on savings accounts, attractive perks, and benefits to help you maximize your savings.
Open a savings account with us today. Curious about our product features and offerings. Head to our website to learn all about them.
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and 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.
