Your bank account is your first step to the world of savings and investments. Having a bank account provides you access to a world of services such as mutual funds, insurance, bill payments, reward points, and many more.
These services were not linked to your bank account in the past when all your transactions were dealt in cash. However, in the age of advanced information technology, where everything is connected, this no longer the case.
Today, you can access your bank account from virtually anywhere and get plenty of things done.
The Traditional Saving Account
The sole purpose of your bank account was to help you save money securely and earn interest on the same. The funds parked in your saving account used to earn decent interests and thus putting your money to work in the most secure manner.
However, today dynamics have changed and keeping money idle in the account is not a prudent choice. Here are five reasons you must not leave your account unused.
1. Minimum balance
Except for the zero-balance account, all other types of accounts have a minimum balance requirement. If you leave your account unattended then there is a possibility that your balance goes below the minimum requirement and this will attract penalty charges further depleting the balance and taking you into the red.
2. Blocked funds in dormant accounts
In order to avoid non-maintenance charges, you generally leave a decent amount in the account. Many times it so happens that you have multiple accounts than actually needed and thus, block funds lying in a dormant account. These funds may be invested to earn more returns. Reviving a dormant account is certainly a time-consuming effort wherein you might have to walk into the branch to complete the entire long and cumbersome procedure.
3. Other services
Your bank account offers a plethora of other services that enable you to get a lot more done in very little time and effort. You can set-up standing instructions for all your bills and avoid any late payment charges. Using these additional services may also benefit you with special programs and reward points.
Without a savings account, you cannot access investment options such as mutual funds; systematic investment plans (SIPs) and equities among others. You may also invest in traditional products like fixed and recurring deposits. You can even profit from the sweep-in fixed deposits where the amount exceeding minimum balance is converted to a deposit.
5. Tax Exemption on Interest
Interest earned on the balance in your account is taxable. However, you can claim an exemption to a maximum of INR 10,000 under section 80TTA of the Income Tax Act on the same.
Bank accounts may open several doors to financial freedom when used wisely. It is important you do not maintain multiple unused accounts to maximize the benefits on the simple and basic bank account.