This is a very simple question but estimated 4,30,000 crore account holders dont know about!! We all know that its absyimal 3.5% per annum but it goes little beyond it and banks continue to swindle the poor customer unknowingly – here is how.
For example on April 10th, you have zero balance ( not possible but hypothetically) and you deposit 1 Lakh on April 11th into your account. Suppose you withdraw this 1 Lakh on may 31st – there is no interest paid – its a big fat zero – why?
The answer lies in simple rule that banks follow for savings account. All most all banks in India pay interest on minimum balance held between 10th and 30 or 31st of that month. So according to that rule your entire 51 days money did not get any interest but the bank has lent it to another customer at 9.5% and earned that income – this is a major source of income for all banks in India.
To avoid this pitfall do the following:
a)Make deposits in your savings account before or on the 10th of every month.
b)Ensure that you withdraw any funds only after the 31st or the last day of every month.
c)More importantly leave bare minimum funds in your savings account to pay for monthly expenses and immediate payments and move the rest in short term fixed deposits. This way you have liquidity and at the same time you continue to earn higher interest. Better yet, park funds in higher interest rate fixed deposits, and take an overdraft against the deposit for any contingencies.