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Salary account vs savings account – Find out which one suits your needs.
Most of us manage two types of financial accounts - a Salary Account and a Savings Account. It's like having two wallets - one for daily expenses and another for saving towards future goals. Typically, both accounts offer basic features like debit card and online banking, yet they serve distinct purposes.
A Salary Account acts like your primary wallet, receiving your paycheck and facilitating day-to-day transactions. A Savings Account, on the other hand, operates like a secure vault designed to accumulate funds and potentially earn interest for plans.
This article will explore the differences between Salary Accounts and Savings Accounts, helping you understand which suits your financial needs best.
A Salary Account is one opened by an employer to credit your salary. Typically, when you join an organisation, your employer provides you with a new account in which your salary, bonuses, and financial incentives are credited each month. This account is also known as a zero-balance account because you are not required to maintain a minimum balance.
Benefits of a Salary Account:
A Savings Account is a standard account offered by banks where you can deposit your savings. It's often the first account people open to handle their finances and store their savings securely. There are various types of Savings Accounts available, including basic Savings Accounts, premium accounts, and online Savings Accounts. Banks usually require you to maintain a minimum balance in this account as specified by their terms. Additionally, the money you deposit in a Savings Account earns interest over time, helping your savings grow passively.
With DBS Bank app, you can open a new saving account in a few minutes! Download the app to get started.
Comparison Factors
Salary Accounts
Savings Accounts
Purpose
For employers to deposit your monthly salary
To deposit savings and hold a bank account
Minimum Balance Required
Not required – you can withdraw all the funds from this account.
Maintaining a minimum balance is mandatory. The amount differs from bank to bank.
Conversion
Converts to a Savings Account if no salary is credited to the Salary Account for three consecutive months.
Possible to convert to a Salary Account if your employer has an existing relationship with the bank with which you have a Savings Account.
Account Opening
Your employer partners up with a specific bank organisation - you cannot choose the bank.
You can open an account in any bank of your choice
Account Holding and Operations
Can be held and operated by individuals only. There is no provision for joint Salary Accounts.
Can be held and operated individually or jointly with others
Let us now take a closer look at the differences between Salary Accounts and Savings Accounts:
Both Savings and Salary Accounts serve different purposes. A Savings Account helps you manage your finances by holding or parking money. A Salary Account is used as a means by your employer to credit your salaries.
Both Salary and Savings accounts earn interest, often at similar rates in most banks. However, many banks offer various types of Salary and Savings accounts to better meet customers' needs. Interest rates can vary between banks and even among different types of accounts within the same bank.
Salary accounts do not have the requirement to maintain a minimum balance; this is why they are also referred to as zero balance accounts. On the other hand, banks require you to maintain a specific minimum balance in your savings accounts. Failure to maintain the adequate minimum balance may attract penalties.
If there are no transactions in your Salary Account for whatever reason for three consecutive months, the account gets converted into a Savings Account. You will then have to comply with the minimum balance requirement associated with Savings Accounts. On the other hand, a Savings Account does not convert due to inactivity. However, suppose you wish to convert your Savings Account to a Salary Account. In that case, it can be done, provided your new employer has an existing banking relationship with the same bank with which you have your Savings Account.
A salary account can be opened only by an employer or a corporation. You cannot typically choose your preferred bank for this account, as it is offered under a tie-up between your employer and the bank. Also, your employer will open only one salary account for you. A savings account is a personal account that that allows you to manage your finances. You can open a savings account with any bank if you prefer and have multiple savings accounts as well.
A Salary Account is usually an individual account, i.e., you cannot open it jointly with another person, and you are the chief signatory of this account. However, when it comes to Savings Accounts, you can open them jointly with other people – spouse, parents, or children.
To open a Salary Account and enjoy its benefits, you must be employed with an organisation. However, there are no specific eligibility requirements for opening a Savings Account. Anyone with the necessary documents, such as an Aadhaar and PAN card, can open a Savings Account.
Despite the difference between Salary Accounts and Savings Accounts, we can find many similarities between them. These include:
Aadhar Card + PAN Card + Video KYC = Account opened!
Many people typically maintain both a Salary Account and a Savings Account. The Salary Account is where they receive their income, while the Savings Account is primarily used for storing money and handling daily expenses. Depending on personal preference, a salaried worker may hold these accounts with the same bank or opt for different banks.
It's essential to carefully compare interest rates and other features various banks offer before deciding where to open your accounts. This ensures you choose a bank that best suits your financial needs and goals.
After verifying your KYC details, DBS Bank will open your account at the earliest.
Although the two accounts may look similar, there are several notable differences to help you decide which suits you the best. If you are already employed, your salary may be credited directly into your Salary Account. Even so, it is better to open a Savings Account as well, since it enables you to park your savings, create Fixed Deposits, earn reward points and cashback, and more.
Happy shopping with the DBS Bank debit card! Download the app to open your digiSavings account instantly and get your debit card!
*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.
