Trying to acquire higher returns on your savings is a smart move, mainly when some banks advertise higher interest rates on Savings Accounts. It is easy to feel tempted to shift your funds or open a new Savings Account to take advantage of these offers. Let us explore the precautions you should take while switching banks for better interest rates so that you can make the best decision:
Pros of switching banks for better interest
Check the market interest rates
Savings Account interest rates in India typically range between 2.5% and 7% per annum. The interest rate depends on the bank, account balance, RBI repo rate, and the account type. While many large public sector banks offer lower but stable rates, newer private and digital banks often offer high rates to attract new customers.
Higher earnings
If you maintain a large balance in your Savings Account, changing your account to a bank offering a higher interest rate results in additional earnings.
Integration with investments
Some banks offer access to Mutual Funds, Digital Gold, and Credit Cards on their website. If your bank lacks these options, a switch is beneficial beyond the interest rate.
Things to consider before the switch
To make an informed decision, check whether the higher interest rate is sustainable or temporary. Enquire about the customer service with existing customers of the bank or check online reviews. You should also check whether the bank offers online banking features. If you are still unsure, here are a few middle-ground solutions:
Open a second account
You can maintain your existing Bank Account for salary credits or significant transactions and use the second high-interest account to build your savings and emergency funds. This way, you can earn high interest rates and track your finances.
Use emergency funds
Digital banks offering higher rates are ideal for storing emergency funds for three to six months since the money stays liquid while earning above-average returns.
Safety checklist you should follow while choosing a new bank
If you decide to go ahead with switching or opening a second account, ensure:
- The bank is RBI licensed, and your deposits are DICGC-insured. You can be at ease with DICGC insurance.
- Check whether the mobile app is secure and reviewed well
- Double check Savings Account interest rate terms on the official website rather than simply believing random advertisements.
- If you plan to open a Bank Account online, ensure that the bank has a responsive support system through email, chat, or call
Conclusion
Switching banks for a better savings interest rate is safe, provided you do so cautiously. Thoroughly review the long-term benefits, stability, and terms. With most banking services digitised and regulated by the RBI, customers have more freedom than ever to optimise their banking strategy. Your primary focus should always be on total value interest earnings, convenience, digital features, and customer support.
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