How are Salary Accounts different from Savings Accounts?
A Salary Account is a Savings Account type that various banks offer. Such accounts are different from a Regular Savings Account. Let us understand the differences between the Salary and Savings Account.
About Savings Accounts
A Savings Account is the most crucial financial product that helps you manage your finances. It offers a safe space to store your surplus amount and earn interest at a specific rate your bank decides. Banks provide different Savings Accounts, including Regular Savings Accounts, Women’s Savings Accounts, Zero-Balance Savings Accounts, and more.
An overview of Salary Accounts
A Salary Account is usually opened by employers for their employees. This account lets you credit the employees' salaries in a lump sum every month. This account is crucial for salaried individuals and offers a range of perks.
Salary vs. Savings Accounts
The differences between Salary and Savings Accounts include the following:
- Purpose of the account
Employers or salaried employees typically open Salary Accounts to deposit or receive salaries every month. Employers tie up with specific banks where their employees’ Salary Accounts are opened. Conversely, individuals open Savings Accounts to deposit their savings. - Opening of the account
Anyone can open a Regular Savings Account, but no one can open a Salary Account. Instead, an employee or business should tie up with a specific bank to open a Salary account for its employees. - Minimum balance requirements
A Salary Account is also called a Zero-Balance Account. You do not need to maintain a minimum balance. Consequently, employees can withdraw the entire salary they receive from their employer in their Salary Accounts without worrying about a minimum balance. They also need not stress about paying a penalty for failing to do so.
With most private banks, you need not maintain a minimum balance in a Regular Savings Account. If the account balance falls below this limit, you will be charged a penalty.
- Account conversion
If no salary is credited to your Salary Account for usually three consecutive months, banks automatically convert this account into a Regular Savings Account. If you have a Savings Account with the same bank your employer has tied up with, the bank can convert it into a Salary Account upon request. - Choice of bank
When it comes to a Savings Account, you can open Bank Account at your preferred bank. For Salary Accounts, a company needs to tie up with a specific bank to offer these accounts to its employees. Hence, employees cannot choose their preferred bank when opening such an account.
Conclusion
Salary Accounts differ from Regular Savings Accounts in various ways. Individuals can use the former to receive salaries, while the latter can be used to save and manage everyday expenses.