Salary Account vs Savings Account: What is the Difference
While a salary account is also a type of savings account, it is not the same as a regular savings account. Read this post to know some of the biggest differences between the two.
Most adults are introduced to the world of banking and finance with a savings account. Similarly, a salary account is generally the first step of starting professional life as a salaried employee. While a salary account is also a type of savings account, it is very different from a regular savings bank account.
From salary account benefits, purpose, balance requirements to who is allowed to open the account, there are some significant differences between these accounts. Some of the biggest differences between the two are highlighted below-
1. Account Purpose
A salary account is generally opened by an employer or a salaried employee for depositing or receiving monthly salaries. Employers have tie-ups with specific banks where their employee salary accounts are opened. When an employee is hired, employers generally open a salary account for the employee.
On the other hand, a savings account is a bank account where individuals can deposit their savings. Its primary objective is to encourage savings and make it easier for the account holders to manage their finances.
2. Minimum Balance Requirements
A salary account generally does not have any minimum balance requirements. Therefore, the entire salary that an employee receives in the salary account can be withdrawn without worrying about any minimum balance limit or penalty.
With most private banks, there is generally a minimum balance you are required to maintain in your savings account. If the account balance falls below the minimum balance, the bank can penalise the account holder.
3. Account Convertibility
In the case of a salary account, the account is automatically converted into a regular savings account if no salary is credited for a certain period (generally 3 months). Once the account is converted into a regular savings account, the account holder will then be required to maintain the minimum balance as per the terms and conditions of the bank.
Converting savings account to salary account is possible if the bank permits. For instance, if you have a savings account in a bank and your new employer also has a tie-up with the same bank, the regular savings account can be converted into a salary account.
4. Account Opening and Interest Rates
As mentioned above, a salary account is either opened by the employer or an employee in the bank that is empanelled with the company. But a regular savings account can be opened by any individual.
Both the accounts are interest-bearing accounts. The salary account and savings account interest rate is generally the same in most banks. However, most banks now offer many different types of salary and savings accounts to meet the customers' banking needs better. The interest rate can vary between banks and even different types of salary/savings accounts offered by the same bank.
Should You Have a Salary and Savings Account?
Most individuals generally have a salary account as well as a savings account. They receive their salaries in the salary account, while the savings account is generally used for saving and managing day-to-day expenses. A salaried employee can have their salary and savings account in the same or different banks.
Ensure that you thoroughly compare the interest rate and other features before choosing a bank for your account.
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