Savings accounts are one of the most undervalued financial tools at our disposal. They do not have the glamour or the “returns” associated with investment accounts nor do they provide “rewards” associated with credit cards. What they do provide is a ready-to-use, liquid income along with some savings. Here are five things that you need to look out for before you open a savings account:
1. Deposit and minimum balance
Opening a savings account usually comes with minimum deposit and balance maintenance requirements. However there are savings accounts available that have no deposit and/or minimum balance requirements. Shop around and check for any trade-offs in the form of interest rates or other facilities.
2. Cheque facility
Savings accounts usually do not come with cheque facilities. That’s what zero-interest current accounts are for. However, there are savings accounts that do provide cheque facilities as well. In addition, many banks provide current accounts linked to savings accounts – that way you can both earn interest and get the convenience of being able to issue cheques.
3. ATM and Branch Network
You will also need to check up on the bank’s ATM network. Does the bank have sufficient ATMs especially near your residence, your place of work and most importantly, near your favourite shopping plazas? If you are a frequent overseas traveler you might also want to have the comfort of knowing that your bank has numerous ATMs in other countries as well. A global bank like Citibank might be your best bet then. A wide branch network also helps.
4. Interest Rate
Interest rates vary widely and you will do well to shop around. Before you settle in on an account that provides the highest interest rates check the stability of the rates offered by that particular bank. What’s the point of going for high interest rates if these rates are going to be steeply downgraded in a few months’ time?
Another thing to check is the compounding factor. Interest rates are compounded on a daily or monthly basis and the interest accrued is credited to the account as per the bank’s policy. For instance, this could be on a monthly or a quarterly basis.
If you are opting for an Islamic Savings Account you should remember that the Shariah specifically forbids interest and such accounts do not pay interest although banks at their discretion may credit “Hibah” or a token / gift to such accounts periodically.
5. Other Facilities
The availability and scope of Internet, Mobile and Phone banking should be considered. Also, whether your savings account comes with just an ATM card or a NETS card that allows you to pay for your purchases. If you are an expat you might be in interested in the availability and charges levied for GIRO transactions to accounts overseas.