Maximise Returns on Your Savings Accounts

While opening our first bank account or Savings Account, most of our parents would say, “Open a high-interest Savings Account. You’ll enjoy dual benefits – your money will be in a secure place and you will be earning higher returns.” They were right. The goal should be to get the most out of your savings.

In this article, we have provideed practical tips and so you can maximise returns on your Savings Account. Let’s dive in!

1. Choose High-Interest Savings Accounts

One of the best ways to maximise savings account returns is to opt for  high-interest savings options. Not all banks offer the same interest rates, so research is vital.

Consider exploring smaller, private, or digital banks. These banks often offer high-yield savings accounts to attract new customers. Some leading banks in India, such as Ujjivan SFB, offer interest rates exceeding 7% per annum.

If you have ₹1,00,000 in a traditional savings account earning 3% per annum, your interest after one year would be ₹3,000. However, in a high-yield account offering 5%, you would earn ₹5,000, which is a ₹2,000 difference without any extra effort.

Maintain the Minimum Balance

Many banks require a minimum balance to offer higher interest rates. Failing to maintain this balance could result in penalties, offsetting your earnings. Always ensure you're aware of this requirement.

Leverage NRE/NRO Accounts for Overseas Income

If you earn income abroad, you may want to explore  Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts . These accounts offer competitive interest rates and tax benefits (NRE accounts), making them attractive for NRIs looking to save in India.

2. Diversify Your Savings Across Accounts

Relying solely on one account might limit your returns. Spreading your savings across different accounts can help you manage risk and boost your total earnings.

Use Multiple Accounts

For example, you can open one high-yield savings account for short-term goals and another one for long-term savings. This strategy enables you to make use of multiple offers from various banks.

Earn from Promotional Interest Rates

Banks sometimes run promotions, offering higher interest rates for a limited period. If you're flexible and willing to switch banks periodically, you can benefit from these short-term gains.

FD Laddering

Although Fixed Deposits (FDs) aren't savings accounts, you can combine them with your savings strategy. Consider laddering your FDs, meaning you split your savings into multiple FDs of different maturities. This approach helps balance liquidity and better returns as interest rates fluctuate.

3. Take Advantage of Interest Rate Optimisation

Timing is crucial when it comes to interest rate optimisation . Interest rates offered by banks can change based on RBI policies, market conditions, or the bank's strategy.

Stay Informed about RBI Rate Changes

The RBI's monetary policies may directly impact interest rates on high-yield savings accounts. For instance, if the RBI raises the repo rate, banks often increase the interest rates on savings and deposit products. Keeping an eye on these changes can help you shift your funds into higher-earning accounts.

Look for Compound Interest Accounts

Interest compounding frequency is another factor that can boost your returns. Savings accounts that offer monthly compounding yield higher returns compared to accounts that compound quarterly or annually. 

4. Utilise Digital Banking Tools and Features

Many banks now offer digital features that can make managing your savings more effective and profitable.

Automatic Transfers and Goal-Based Saving

Digital banks and some traditional banks offer goal-based savings plans, where you can set financial targets, and the system automatically transfers funds from your main account to your savings account. This feature ensures you're consistently saving without the temptation to spend.

Use Apps to Track Interest Earnings

There are several financial apps that allow you to track and compare interest earnings from various savings accounts. This feature can help you determine where your money is performing best and will enable you to shift funds when necessary.

Sweep-In Facility

Many Indian banks offer a sweep-in facility, where excess funds in your savings account are automatically transferred into an FD. If you need funds, the money will be transferred back to your savings account without breaking the FD entirely. This feature ensures that your funds earn better returns while remaining accessible.

5. Review Your Savings Strategy Regularly

Saving isn't a one-time activity; it requires constant review and adjustments to maximise your returns.

Monitor Interest Rate Trends

As mentioned earlier, interest rates are subject to change based on monetary policies and market conditions. Review your account regularly to ensure you're getting the best return for your money. If a better opportunity arises, be willing to switch accounts.

Evaluate Account Fees

Certain accounts with higher returns may also have hidden fees, such as maintenance charges, ATM fees, or penalties for early withdrawals. These can eat into your earnings if you're not careful, so always weigh the pros and cons of different accounts.