Salary vs. Savings Account: What's the Right Choice for You?

In exchange for liquidity, a savings account  requires you to maintain a minimum balance based on the account variant. If this balance is not maintained, you will have to pay a penalty. However, with a salary account, you usually don’t need to maintain a minimum average monthly balance. Both a salary account and savings account offer competitive interest rates, so it becomes crucial to choose the type of account that suits your needs and brings desired returns. Read below to find the key difference and the best account type suitable for your financial objectives.

What is a savings account?
 

As the name suggests, a savings account is an account that you can open with a banking institution that allows you to deposit money and save up. The bank incentivises you by securing your money and offering a modest rate of interest. 

One of the biggest benefits of a savings bank account is the safety and availability of funds at all times. This money you put in it can be used for your short-term needs or emergencies such as medical expenses, car repairs, an important purchase, or unexpected travel.

A savings bank account does have some drawbacks. In exchange for liquidity, it offers a lower rate of interest compared to other instruments with lock-in periods. It also requires you to maintain a minimum balance based on the account variant. If it goes lower than this, you will have to pay a penalty. Lastly, the interest you earn is considered taxable income. This tax obligation can reduce the overall returns you earn from your savings bank account. 

What is a salary account?
 

A salary account is opened with the sole purpose of crediting an employee’s salary each month. It is opened by banks on request from businesses with a sizable number of employees. Salary bank accounts come with various features that benefit employees. The most significant advantage is that it requires zero minimum balance, so you can withdraw your entire savings without having to worry about a penalty fee. This offers a significant layer of convenience, particularly when unexpected expenses arise.

A salary account also offers easy access to various borrowing products. Metra Trust, for instance, offers salaried employees an easy application process and quick approval for a home loan, car loan, personal loan, etc., at competitive interest rates. Banks can offer these attractive benefits as they are sure you will earn a certain amount each month that can go towards paying EMIs, reducing the risk of default. You can choose between Platinum Plus and Classic Plus salary accounts which offer unique benefits depending on your requirements such as higher transactional limits, monthly interest payout, insurance cover, and exclusive membership on a digital platform to match your lifestyle and entertainment.  

A salary bank account also comes with several investment services that let you easily invest in government bonds, insurance products, etc. This serves as another layer of financial security, allowing you to grow your money without undue complexity. The smart investment plans can be a valuable tool in a salaried individual's financial planning as they get returns on the invested capital.

Note that only employers can open a salary bank account. If you are not a salaried individual, you won't have access to this account type as it is exclusively tailored to facilitate easier financial management for employees.

Types of salary accounts from Metra Trust

1. Platinum Plus Salary Account

This salary account is designed for a premium banking experience. It offers an array of benefits, including:

• Zero balance requirement: Enjoy the convenience of not maintaining a minimum balance.
• Earn monthly interest credits: Get better returns on your deposits with a monthly interest payment facility.
• Higher ATM withdrawal and POS limits: Access increased cash limits at ATMs of up to ₹2 lakhs and POS limit of ₹6 lakhs per day.
• Complimentary insurance cover: Receive personal accident insurance coverage of ₹50 lakhs and air accident cover of ₹1 crore along with protection against various unforeseen events, adding an extra layer of security.

2. Classic Plus Salary Account

This account caters to those who require a robust yet straightforward banking solution. Key benefits include:

• Zero balance requirement: You do not have to worry about maintaining a minimum balance.
• Unlimited free transactions: Enjoy unlimited transactions at ATMs across the country.
• Free access to banking services: Manage your finances efficiently without incurring any fee on all salary account banking services.
• Monthly interest payment: Enjoy a better yield from your salary account with the monthly interest payment facility.
• Complimentary insurance: Secure yourself with a personal accident cover of ₹35 lakhs and air accident cover worth ₹1 crore. 

Differences between a salary account and savings account

The following are the differences between a salary and savings bank account:

• Purpose 

Salary bank accounts serve primarily for receiving monthly wages. A savings account is used to keep funds, save for future purposes, and earn interest on savings. People use it to save for various needs such as vacations, emergencies, or investments.

• Minimum balance requirement

A salary account typically doesn't require a minimum balance, but a savings account often imposes a minimum balance requirement. If you fail to maintain this balance, you will incur penalties. 

• Interest rates

Most banks provide interest on both salary and savings accounts, usually at similar rates. However, to better meet customer needs, banks now offer various types of salary and savings accounts. Hence, they can have varying interest rates, even within the same bank.

• Who can open the account?

An individual whose company maintains a salaried relationship with a bank can open a salary account. On the other hand, almost anyone can open a digital savings account by submitting the required documents and satisfying basic eligibility criteria. Age, occupation, and income level usually don't matter. Even kids can have savings accounts, supervised by parents or guardians.   

Salary account v/s savings account: Key differences

Similar features of a salary account and savings account
 

The common features between salary and savings accounts are as follows:

• Interest income earning 

Both salary and savings accounts let you earn interest. You get a small percentage of your account balance as interest, and the frequency can be on a monthly or quarterly basis. Thus, your money doesn't just sit idle, it grows over time.

• Cheque books, passbooks, and debit cards

These transaction tools add flexibility and security to your banking experience. A chequebook helps in making payments without cash, a passbook records all your transactions, and a debit card makes cash withdrawal and online shopping easy. 

• Remote account access

Another feature that both types of accounts share involves remote access. Through internet and mobile banking, you can perform a range of actions. From checking balances to paying bills, you can handle everything without setting foot in a bank branch.

• Online fund transfers

Fund transfers are simple and quick with both types of accounts. You can use several methods like NEFT, IMPS, RTGS, UPI payments, and digital wallets to make transactions. You can send money across the country or even abroad, settle bills, or pay for services with just a few taps on your phone or clicks on your computer.

• Easy receipt of payments

Not just for outgoing transactions, these accounts are equally proficient in receiving funds. Someone can transfer funds to your account via a multitude of methods, be it UPI or a simple bank transfer. So, it doesn’t matter if it's your monthly salary, a monetary gift, or any other form of income, the money lands securely in your account and instantly.

• Alerts and notifications

For any transaction you make or any activity in your salary or savings account, an SMS alert or notification arrives on your phone. This keeps you informed and adds a layer of security, notifying you of any unexpected or unauthorised activity.

• Utilising banking facilities

Salary and savings accounts offer more than just places to store money. You can apply for loans, open fixed or recurring deposits, make investments, and check your account balances.

• Zero fee banking

With Metra Trust salary and savings accounts, you exclusively enjoy zero fees on all common banking services such as unlimited ATM withdrawals, online money transfers, cash deposits and withdrawals at branches, free debit card and DD issuance, free chequebook re-issuance, and more.  

Conclusion
 

Both savings and salary accounts serve their intended purposes. If saving money is the goal, choose a savings account. If you are a salaried individual who wishes to manage money optimally, a salaried account is best suited to your needs. Whatever your requirement, Metra Trust has a variety of banking options for all your needs