Personal FinanceHow different are Salary Accounts? Here are some features and benefits they offer!
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In the vast world of bank accounts that exist, a Salary Account is probably the one you'd identify with easily. It's essentially a Savings Account in which your employer deposits your salary. If you've worked for a few years now, you've probably had more than one salary account linked with your name.
While Salary Accounts have the features of a savings account, they come with benefits catered to just salaried employees. Wondering what these are? Continue reading to know more!
Salary accounts allow employers to pay their employees their salaries seamlessly. But apart from the convenience they come with, these accounts provide their account holders, i.e., employees, with other banking benefits.
Salary accounts are also classified as interest-bearing accounts, they help their account holders earn interest on the balance they maintain within their account. This interest is ordinarily calculated daily and is deposited into one’s account each quarter.
There are several ways in which salary accounts benefit the employers, their employees and the banks where these accounts are held. Some of these have been discussed below.
Apart from a debit card and a chequebook to start with, most salary accounts offer the following (if not more) benefits -
Zero balance account holders needn’t worry about maintaining a certain balance in their accounts, nor do they have to risk facing any penalty for not maintaining the balance. Employees that hold such accounts can take advantage of the flexibility they provide.
With a salary account, account holders can send and receive funds online from anywhere in the world. Cumbersome cash withdrawals and cheque deposits are therefore not needed when transferring funds. Most banks also provide account holders with phone banking facilities that make it possible to manage transactions from their mobiles.
Account holders can invest in government bonds, mutual funds, insurance products, and more. Further, if an account holder wishes, a Demat account can be linked to their salary account such that they can make stock investments and trade hassle-free.
Salary account holders can access several loans from their banks. Further, if you already have a salary account with a bank, the documentation needed to avail a loan with the same bank is reduced, making the process faster and simpler. Existing account holders tend to enjoy more competitive interest rates in comparison to those that don’t hold accounts with the concerned bank.
While salary accounts allow monthly salaries to be credited, they also allow account holders to carry out the following tasks.
a. Accountholders can deposit cash and cheques into their salary account. In case large sums of cash are deposited, a declaration of the source is required.
b. Money can be transferred from and to a salary account.
c. Account-holders can withdraw their money from this account at any point in time.
A large number of companies open salary accounts on behalf of their employees. That said, a few companies provide their employees with the right to choose the bank where they’d like to open their salary accounts. If the latter applies to you, you should consider the following factors before selecting.
Consider the bank’s reputation and select a reputed bank so that your money can be safe.
Make it a point to understand whether or not the bank you opt for has seamless digital banking services. Digital banking is the need of the hour. With the world around you going digital, this isn't something you want to miss on.
Take a look at the bank’s customer support and opt for one where the customer service is good. You never know when you might need help and having a relationship manager and an active customer support can go a long way.
Suppose there is a situation where your salary isn’t credited into your salary account for three consecutive months. In that case, your account will be converted to a regular savings account. This would mean that the services and benefits enjoyed would also convert.
On the flip side, if you join a company that holds salary accounts with a bank where you already hold a savings account, then the bank can convert your existing savings account into a salary account after obtaining a letter from the company.
Salary accounts might not be a completely different ball game from savings accounts, but their benefits can work out well for you on the long term. It's best to do your research before opting for a salary account, if you have the option. If you wish to use your salary account for everything from investing to saving, buying and more, Fi's salary account could be a game changer for you. With great rewards and a super neat app that simplifies your finances, this could be all that you need to take your next big financial steps. Check out more about Fi here.
Fi offers its users various financial services to simplify finance as they save. You can visit the website or download the app to know more.
Consider the following benefits that help set apart salary accounts from savings accounts.
A salary account benefits the holder as it doesn’t require a minimum balance to be maintained, while savings accounts might require account holders to maintain a minimum balance.
Salary account holders get to enjoy several benefits that aren’t linked to any fees. In contrast, benefits offered under savings accounts are fewer and tend to be linked to fees.
There is no minimum balance linked to salary accounts. Owing to this, they are called zero balance accounts.
No, salary accounts aren't tax free. Salary accounts are used to deposit salaries and if your salary is in a taxable bracket, you will have to pay income tax.
Opening a salary account is super simple. Once you finish your research and choose a bank to open an account with, you can opt in to open this account online or from the branch. In most cases, companies are partnered with banks and open salary accounts for their employees. All you need to have is identity proof and employment proof to open a salary account.
While there are multiple banks with great salary accounts, you need to decide what you're seeking for. Be it rewards, safety, or just a zero-balance account, look into what you need. Traditional banks like HDFC, ICICI etc offer well-known salary accounts, but if you're looking to branch out to digital-first banking , Fi.Money offers a salary account with great rewards. What's better is that you can manage all your finances in one app.
Salary accounts are generally good for storing money but that's about it. If you're looking to get great interest on your money, or grow your money over a long period of time, a salary account shouldn't be your first choice.
