In India, most people take their first step into banking and finance with a savings account. On the other hand, salaried employees begin their professional journey and receive their salary in a salary account. While a salary account is also a subtype of savings account, it largely differs from a regular savings bank account.
Understanding the key differences will help you manage your finances efficiently. Read this guide for a complete comparison of a salary account vs savings account.
Understanding Salary Account
Employers typically open a salary account for their employees and use it to deposit their monthly salaries.. The most prominent feature related to the salary account is that it is a zero-balance account. This means account holders are not required to maintain a minimum balance to keep the account active.
Understanding Savings Accounts
Generally, a savings account is opened by individual customers to keep their savings. Every citizen has this type of account to manage their own finances efficiently. They can open several types of savings accounts, including basic savings accounts, online savings accounts and premium accounts.
What are the Similarities between Salary Account and Savings Account?
Both salary accounts and savings accounts share several fundamental features that make everyday banking convenient and accessible. Firstly, both types of accounts allow for deposits and withdrawals, enabling account holders to manage their funds with ease. Each account provides a passbook facility to track transactions, and users can access net banking, mobile banking, and phone banking services for seamless digital transactions.
ATM usage is typically free for both, including cash withdrawals and balance inquiries. Both accounts come with debit card and cheque book facilities, supporting a variety of payment and withdrawal options. Additionally, electronic fund transfers such as NEFT, RTGS, and IMPS are available with both accounts, making it easy to transfer money securely. Account holders receive SMS and email alerts for transactions, ensuring transparency and security.
Importantly, interest is earned on the balance maintained in both accounts, though the rates may vary depending on the bank and account type. Lastly, both salary and savings accounts are protected by deposit insurance as per RBI norms, offering peace of mind regarding the safety of deposited funds.
What is the Difference Between a Salary Account and a Savings Account?
Let us take a quick glance at the difference between savings and salary accounts:
| Parameters | Salary Account | Savings Account |
| Key Purpose | Employers apply to banks to open salary accounts for their employees, allowing them to deposit monthly salaries. | Any individual can open a savings account to deposit money for long-term savings. |
| Minimum Balance Requirements | With salary accounts, you do not need to fulfil a minimum balance requirement. | When opening a savings account, banks require you to maintain a minimum balance to keep the account active. |
| Interest Rates | Banks offer interest on salary accounts. The interest rates depend on the type of account you have. | Savings accounts are interest-bearing accounts. The rate varies based on factors such as the type of account and the bank. |
| Account Conversion | Banks convert a salary account into a regular savings account if you do not receive any salary for three months. | If you already have a savings account with the bank tied up with your company, it gets converted into a salary account upon application from the employer. |
| Who can open | Only the employer can approach a bank to open a salary account. The company must have a tie-up with a specific bank to open this type of account. | Any person can open a savings bank account to deposit money and efficiently manage finances. |
Salary Account vs Savings Account: Which One Should You Choose?
After exploring the difference between savings and salary accounts, you must have understood that only employers can open salary accounts as they are meant to receive salaries. You cannot open a salary account directly.
On the other hand, you can open a savings account in any bank to save money for future emergencies and manage your finances more effectively. It indicates you can have both a salary and savings accounts for better financial management, as they serve different purposes.
The Bottom Line
Salary account vs savings account– understanding the difference is essential for making well-informed financial decisions. Ensure that you thoroughly compare all the significant features, such as interest rates, withdrawal limits, and crucial factors like spending habits and source of income, to manage your finances effectively.
However, you can opt for Torus Digital to open a savings account. We offer 7.75% interest on savings accounts. You can open a zero-balance savings account with us. Download the app today!
