Banks and financial institutions offer a host of account variant based on individual requirements. Some are savings oriented, while others are growth-oriented. Among those, salary accounts and savings accounts are the most common. These accounts offer almost the same benefits such as debit cards, cheques, internet banking access and more. However, there are some fundamental differences in the way they work. Let’s find out the differences between a salary and a savings account.
Understanding savings and salary account
The savings and salary accounts appear to be the same, considering their benefits. However, there are a few differences in their purpose and the way they work, as mentioned below.
Savings account
A savings account is one of the easy-do bank accounts for retail banking customers in general that offer interest on your deposit, including numerous banking services such as bill payment, online fund access, money transfers, debit card, cash withdrawals and more. It is among the first accounts you may need open to avail of the banking services. These accounts are savings oriented and provide interest rates between 3.5% and 6% based on the deposits.
IDFC FIRST Bank offers a competitive interest rate of 6% that is credited on a monthly as well as a quarterly basis. Moreover, you get access to an array of banking services online using IDFC FIRST Bank mobile app. To open an IDFC FIRST Bank savings account, you need to visit the official portal of the bank and apply online with a hassle-free application and documentation process.
Salary account
A salary account serves the purpose of receiving your salary in your bank account. Your employer holds your salary account details to credit your monthly income. Depending on the bank, you may get the same features and benefits as a savings account, including interest rates.
Other services like bill payments, online fund transfers, cash withdrawals, debit cards and cheque facilities are common to both salary and savings accounts. Salary accounts are usually opened by the organisation you are joining to provide income, incentives, bonuses etc.
Key differences between a salary and a savings account
The key differences between a salary and a savings account are based on various factors like:
- Objective
Both savings and salary accounts have different objectives. A savings account focuses on growing your wealth and managing your finances, while a salary account is opened for receiving your salary.
- Minimum balance requirements
Most savings accounts have a minimum balance requirement ranging between ₹10,000 to ₹25,000. However, the salary account does not have a minimum balance requirement. Some banks may have minimum balance criteria depending on their terms and conditions.
- Account opening process
The process to open a salary account differs from that of a savings account. Your employer initiates the salary account opening process while you can personally open a salary account in a bank you prefer.
- Account ownership
A salary account is held by a single owner. However, a savings account offers the flexibility to open a savings account jointly with a partner.
Conclusion
If your salary account remains inactive for over three months, it automatically becomes a savings account. You can also convert your savings account into a salary account, but your employer should have an account with the bank you hold.
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