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Savings Bank accounts are one of the most preferred form for savings in our country. It has slowly replaced the old pair of socks or the small locked box that a person previously used to keep his life savings!! Saving bank account gives you the benefits of liquidity, safety and also a nominal return in the form of interest. With increasing competition banks have realised that they have to pack more punch into the traditional savings accounts and developed avriants of the same - where the account holder gets higher returns. But even with these accounts the traditional savings bank account still rules the roost. By smartly managing your cash flows, you can increase the interest earning in this account.
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Though different banks have come out with different means for calculating saving bank interest, the method given below is still the most preferred among banks.
- It is calculated for each month individually.
- It is calculated once every six months.
- The six-month cycle is normally dependent on the financial year cycle followed by the respective bank. It is either calendar year January to December or April to March.
- The interest rate as per the current guidelines is 4.0%. We have set it at 4.0%, but if your bank is offering different rate, you can change the same.
- Principal qualifying for interest payment: The minimum balance that exists in a person's account between the 10th and the last day of that month, is the amount on which the interest payment is calculated. For example, if the balance was Rs. 15000 on the 1st of a month. Then you subsequently withdrew Rs.4000 on 7th. The balance becomes Rs.11000. On 12th you withdraw again Rs. 3000, the balance is now Rs. 8000. On 20th you deposit Rs. 4000, the balance becomes Rs.12000. On 29th you withdraw Rs.5000, the balance becomes Rs.7000. So if you look at the transaction over the month and the balance positions, the minimum balance any day between 10th and last day of the month is Rs.7000, so this amount becomes the qualifying amount for getting interest and interest will be calculated for the month on Rs.7000.
- This exercise will be repeated for all the six months in a cycle to get the interest payment for the six months.
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