Types of Deposit Accounts

Deposit accounts provide a convenient way to securely deposit or withdraw money whenever needed, offering easy access to your funds. When you add money into a deposit account, you may earn interest over time, depending on the type of deposit account. Additionally, learning about different types of account holders is essential as well to understand who can benefit from the deposit accounts.

Deposit account is a bank account where you can deposit money and earn interest, while keeping the funds safe and secure. Each type of deposit account serves different purposes, such as savings, business transactions, or investment goals.

Here is a compiled list of the types of deposit accounts:

• Savings Account

• Current Account

• Salary Account

• Fixed Deposit Account (Term Deposit)

• Recurring Deposit Account

• Specialised Deposit Accounts (NRI, Demat)

• Joint Deposit Accounts

 

Let's check out each of these types in details:

A savings account is one of the most common types of deposit accounts that you can use to deposit money and earn interest.

Features and Benefits of a Saving Account:

• Allows you to deposit or withdraw money as and when needed

• Safe and secure way to store money

• You can earn interest on the deposited amount at a rate of interest decided by the bank

Disadvantages of Saving Account:

• As compared to other deposit accounts, savings accounts come with low interest rates

• In some cases you get restrictions on the amount you can withdraw

There are 4 types of savings accounts:

1. Regular savings account with moderate interest rates

2. High-interest savings account with higher interest rates but having stricter terms

3. Joint savings account that allows multiple account holders

4. Basic or no-frills savings account suitable if you have low income or minimal transaction needs

A current account is a bank account designed for frequent transactions, providing easy access to funds for day-to-day financial activities

Features of Current Account:

• You get unlimited transactions

• Facilitates frequent and high-volume transactions

• No limit on the number of times you can deposit and withdraw the money

• Unlike savings accounts, current accounts generally do not offer interest

Ideal Users of Current Account:

• Businesses

• Professionals

• Individuals with frequent transactions

• Self-employed persons

Types of Current Accounts:

• Individual current account is suitable for individuals with high transactional needs

• Business current accounts are specifically designed for companies

• Packaged current account offers additional perks, such as insurance or discounts

A salary account is a type of deposit account that is opened by companies to credit salaries to their employee’s accounts.

Features of Salary Accounts:

• Zero-balance account

• You are not required to maintain a minimum balance

• Salary gets credited automatically in this account

• Insurance on bank deposits

• Higher interest rates

• Loan facilities at competitive interest rates 

Ideal Users of Salary Accounts:

• Professionals

• Corporate employees

• IT professionals

You can deposit a certain amount in a fixed deposit account for a specific period and at a specific interest rate. However, you cannot withdraw these funds until the said period ends.

Features of Fixed Deposit Account:

• As compared to a savings account, you earn a higher interest rate

• Specific lock-in period during which the funds stay in the account for a fixed term 

• You can withdraw the funds only after it attains maturity

• If withdrawn before maturity you might get a penalty incurred

• Can often be used as collateral for loans

Types of Fixed Deposit:

• Regular Fixed Deposit

• Tax-Saving Fixed Deposit

• Senior Citizen Fixed Deposit

• Cumulative Fixed Deposit

• Non-Cumulative Fixed Deposit

• Flexi Fixed Deposit

• Corporate Fixed Deposit

• Foreign Currency Fixed Deposit

A recurring deposit account allows the account holder to deposit a fixed amount of money at regular intervals for a specific tenure. At the end of this tenure, the depositor receives the total amount invested plus compound interest.

Features & Benefits of Recurring Deposits:

• Compound interest calculation

• Allows you to add small deposits every month

• Interest that is paid on the total deposited amount upon maturity

There are two types of recurring deposit accounts:

• Standard Recurring Deposit

• Flexi Recurring Deposit

• Senior Citizen Recurring Deposit

• Tax-Saving Recurring Deposit

• Child Recurring Deposit

• Corporate Recurring Deposit

• Special Tenure Recurring Deposit

• Cumulative vs. Non-Cumulative Recurring Deposit

Specialised deposit accounts are the ones used to manage a special-purpose fund. 

 

Here are 4 types of specialised deposit accounts:

1. NRI Account 

An NRI deposit account caters to Non-Resident Indians (NRIs) who wish to manage their earnings through this type of deposit account in India.

2. NRE Account

Non-Resident External account is used by NRIs to remit foreign earnings to India without taxation.

3. NRO Account

Non-Resident Ordinary accounts are used to manage income earned in India.

4. FCNR Account

Foreign Currency Non-Resident account is for holding foreign currency deposits without the risk of exchange rate fluctuations.

5. Demat Account

A Demat (Dematerialized) account holds financial securities like shares, bonds, government securities, mutual funds, etc. in electronic form.

 

Specialised deposit accounts are designed to meet specific financial needs and their primary purpose is to offer curated benefits and features that are not typically available in regular accounts

You can get a joint deposit account with any of your family members and share access to the funds with each other. 

Benefits and Risks of Joint Account:

• Convenient for families or business partners

• Allows all the holders to gain access to the deposited funds

• All account holders can see the transactions

• Account holders are jointly responsible for any debts or overdrafts

• No individual control

• Conflicts over financial decisions can create tension

Deposit accounts play a critical role in managing personal finances. Here’s why they are important:

• Different types of bank accounts provide a safe place to keep money, make transactions, and earn interest, as applicable.

• Deposit accounts in India are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC) for an amount up to ₹5 Lakhs.

• Deposit accounts make transactions easy, whether for paying bills, transferring money, or accessing funds.

• Savings accounts and FDs offer interest, making idle money grow for you.

• Certain accounts provide immediate access to funds when needed.

• Deposit accounts like savings or RD can help build an emergency fund.

• A well-maintained deposit account can improve your relationship with your bank, potentially leading to better loan offers.

Before selecting a deposit account, you should consider the following factors:

• Go for deposit accounts offering higher interest rates that can help you maximise your savings or investments

• Analyse if you can easily withdraw your money or whether there is complex procedure to follow

• Enquire if there are any fees for maintaining the account, withdrawing funds, or transferring money

• Some accounts are subject to a tax on the earned interest. So, consider how this might affect your returns

Key Takeaways

• Deposit accounts are of 7 types- savings, current, salary, fixed-deposit, recurring deposit, specialised deposit (accounts like NRI, Demat), and joint deposit accounts

• Deposit accounts help individuals and businesses manage their finances efficiently

• Different types of customer accounts serve different financial needs, like savings, business operations, and planning investments

• Understanding the features and benefits of each type of bank deposit account is essential for making informed financial decision

Choosing the right deposit account depends on your financial goals, whether it's saving for the future, running a business, or managing everyday expenses at the present. By understanding the different types of available accounts, you can make informed decisions and ensure that your money works for you in the best way possible.

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