Difference Between High-Interest Savings Account and Regular Savings Account

When it comes to saving, most people turn to traditional or regular savings accounts offered by banks. However, there is another option that could potentially help you grow your savings at a faster rate –  high-interest Savings Accounts .

In this article, we will explore the key differences by comparing high-interest savings accounts vs regular savings accounts. We will make the account comparison based on interest rates, account features, and how they can impact your savings growth. By comparing these two types of accounts, you'll be able to make an informed decision about which one suits your needs better.

High-Interest Savings Account vs Regular Savings Account: A Comparison

1. Interest Rates: The Key Factor in Savings Growth

High-interest savings accounts are designed to offer a higher Annual Percentage Yield (APY) when compared to regular savings accounts. These accounts are typically offered bysmal finance banks like Ujjivan SFB, and aim to attract savers who want to earn a more competitive rate on their savings. 

 

Traditional or regular savings accounts are what most people are familiar with. These accounts are offered by traditional banks and may have lower interest rates compared to high-interest savings accounts.

Example: Let's say you have ₹1,00,000 in your high-interest savings account and ₹1,00,000 in your regular savings account. The high-interest savings account offers an APY of 3% while the regular savings account offers an APY of 1%. Over a year, your savings growth can differ significantly, as you can see below:

• High-Interest Savings Account: ₹3,000
• Regular Savings Account: ₹1,000

2. Fees and Penalties: Watch Out for Hidden Charges

Banks that offer high-interest savings accounts often have lower fees when compared to traditional banks. They may even waive monthly maintenance fees, making it more affordable to maintain your account. However, read the terms and conditions carefully to ensure there are no hidden charges or penalties for exceeding certain transaction limits. 

 

Traditional banks may charge monthly maintenance fees for regular savings accounts. These fees can eat into your interest earnings, especially if you have a low balance in your account. Additionally, exceeding the allowed number of monthly withdrawals can result in penalties.

3. Safety and Protection: Securing Your Deposits

Both regular and high-interest savings account deposits are insured under DICGC up to ₹5 lakh per depositor per bank. To nullify risk, you may consider spreading out your savings across bank accounts.