All you need to know about Savings Account interest rates

You can use a savings account to safeguard your funds and at the same time earn active interest on the deposited amount to grow your wealth.

A savings account is a simple investment opportunity for anyone to save money for future use. It allows you to easily access your money and increase returns by earning interest every month. Knowing the savings account interest rate can help you maximise your returns.                              

The amount of money a savings accountholder earns on the deposited money in the account is the interest. Banks generally lend these funds from depositors to borrowers at a higher interest rate and, in turn, pay the depositors some interest for the money in their savings accounts.

Most savings accounts require the accountholders to keep a minimum balance. The interest rate, which usually  ranges from 3% to 6%, differs depending on the bank and the amount in the account. If you are wondering how to find the interest rate on a savings account, here’s how it is!

How do you calculate a Savings Account interest rate?
 

As per the recent Reserve Bank of India (RBI) regulations, banks are now required to calculate interest on the balance of a savings account on a daily basis. Depending on the type of savings account and policy, a bank credits the accumulated interest to your account every three months or monthly .

You can calculate the savings account interest with an effective interest rate formula. Most banks use this interest rate calculation formula to determine interest daily.

For instance, if your daily balance in your savings account is ₹4 lakh and the rate of interest is 4% per annum, the formula to find the interest rate is:

The monthly interest on a savings account = Daily balance * (Number of days) * Interest / (Days in the year)

Here,

Daily balance = ₹4 lakh
Number of days = 30
Interest = 4% p.a.
Days in a year = 365

So,

Monthly interest = 4,00,000 * 30 * (4/100) / 365 = ₹1315 per month

Using this interest rate formula, IDFC FIRST Bank calculates interest on the daily balances of savings accounts and credits the total interest once every month. A savings account offers much liquidity and opportunities to earn higher interest.

For instance, IDFC FIRST Bank allows you to earn attractive interest on a digital savings account opened through a video KYC (Know Your Customer) process. The interest on your savings account is credited every month instead of the usual once-in-every-quarter credit and earn more, benefitting from monthly compounding.

You can maximise your earnings on money deposited in your savings account by re-investing the interest earned. This process of earning interest over time in your savings account balance and then letting that amount earn more interest is known as compounding.

To conclude, you can look for the highest interest rate savings account and create wealth through the power of compounding. Using the interest rate formula, you can know the worth of your savings over time. Meanwhile, it also enables you to keep aside some money for an emergency. Why wait? Open Bank Account Online today. 

Disclaimer

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