A savings account comes in handy for keeping savings intact, money that can be used for footing everyday needs and act as an emergency fund. However, banks have placed limitations on the number and volume of transactions made on the account by charging a fee. As these charges vary across banks and types of accounts, a comparison of various charges is necessary to stop your savings account becoming a serious drain on your finances.
Here’s a tally of the most common charges and penalties levied by banks on savings accounts:
- Non-maintenance of average balance charges: Non-maintenance charges are the most common penalties levied by banks.Banks make money from your deposits by lending money to the borrowers. On the expenses side, banks incur operational costs (apart from the interest paid to you on your savings deposits) to maintain and service your savings account. To achieve their Break Even Point, they want you to maintain at least a minimum average balance on your savings account, failing which they levy minimum balance non-maintenance charges. For a regular savings account, banks can levya penalty of Rs 100-350 per monthwhereasfor premium accounts, it can go as high as Rs 600 per month. Carefully consider your needs and your ability to maintain the balance before choosing a savings account.
- Cash transaction charges: If you make a cash transaction beyond the prescribed limit, banks levy extra charges as a means to discourage cash transactions. Most banks allow at least 5 free cash transactions (including deposits and withdrawals) through their regular savings account beyond which they charge as high as Rs 5 per Rs 1,000. Some banks have also placed caps on the total value of free cash transaction in a month. Meanwhile, premium savings accounts requiring higher minimum average balances offer higher limits on cash transactions.
- Cheque book charges: Although, internet banking has gained a lot of popularity over the last few years, there are still many situations where payments through cheques are preferred over online transactions. A standard cheque book, which is free for every quarter, contains 20-25 cheques. If you order a new booklet during the same quarter, an extra charge of Rs 75-100 per cheque book may be imposed. Again, most of the premium accounts with high average balances waive off limits on issuance of cheque books.
- Debit card charges: As nowadays all savings accounts come with debit cards, banks levy issuance and annual maintenance charges for the same. And, depending on the services offered, charges can range from Rs 100 to Rs 800. Some premium accounts, such as Axis Bank’s Priority Account and HDFC Bank’s SavingsMax Account, offer free regular debit cards.
- NEFT & RTGS fees:The two most prominent electronic funds transfer systems in India are National Electronic Funds Transfer (NEFT) and Real-time Gross Settlement Systems (RTGS).While the NEFT system has no lower limit on the transfer of funds, RTGS has a lower limit of Rs 2 lakh per transaction. The transfer of funds is faster in case of RTGS as the settlement is done on a real-time, account to account basis. Axis Bank charges Rs 25 per NEFT transaction of Rs 2–5 lakhs (both through online and branch) while Yes Bank does not charge anything for online NEFT transactions. Some banks also waive off NEFT and RTGS charges for higher balance/premium accounts.
- Cheque return charges:If a cheque issued or deposited by you bounces, then the bank concerned levies a cheque return fee.The return of a cheque issued by you will attract higher charge than the ones issued by third parties. For example,ICICI Bank charges Rs 350 for 1 cheque return per month and Rs.750 for every subsequent return in the same month. Punjab National Bank charges Rs 100 for each cheque of less than Rs 1 lakh and Rs 200 for cheques valuing over 1 lakh. Some banks, such as HDFC Bank, also charge cheque returned non-financial reasons like post dated cheque, date not mentioned and sign mismatch.
To sum it up, as the main purpose of the savings account is to park your savings in it and grow it by earning an interest from it, it is necessary to thoroughly go through the schedule of charges before closing on in any particular savings account.