A savings account is an essential financial product through which account holders can park or withdraw their money without hassles. As individuals’ banking requirements vary, banks have introduced several types of savings accounts for their customers.
However, savings accounts can be broadly classified into regular savings accounts or digital savings account. In this article, we will see the differences between regular savings and digital savings account. But first, let us know what a standard and digital savings account are.
What are regular savings accounts?
A savings bank account is a safe and secure way to park your money and earn a fixed interest on the deposits. Nowadays, you can carry out most of the banking requirements such as transferring money or booking a Fixed Deposit through mobile banking or net banking.However, you have to visit the bank branch and fill-up the form to open a savings account.
Regular savings accounts have a monthly average balance(AMB) requirement that individuals have to maintain regularly. Banks may levy a penalty when account holders fail to maintain the minimum average monthly balance.
What are digital savings accounts?
A digital savings account is a type of savings account through which you can open savings account online. RBI has permitted banks to open instant digital savings account through the Aadhaar OTP verification process. The bank account opening process is completely online, and banks open the account within a few minutes. Instant digital accounts are typically meant for customers who don’t have any prior relationship with the bank. Instant savings accounts can be a zero balance account or may have a monthly average balance.
Differences between regular savings accounts and digital savings accounts
Account opening process:
Opening a regular savings account is a physical process. To open a standard savings account, you need to fill up a physical form, attach your KYC documents photocopies, and get your original documents verified. After the entire process is completed, your savings account is opened within a few working days.
On the other hand, banks open digital savings account instantly without any paperwork from the comforts of your home or office. You need to add your PAN and Aadhaar number to open the account. Later, you will receive an OTP on your Aadhaar registered mobile number that you need to enter to proceed with the online account opening process. Your digital account will be opened after completing the required details. Keep your account number and other information handy for future reference. So, we can see that the account opening process of a digital savings account is instant compared to a regular savings account.
Average monthly balance:
The average monthly balance is the minimum balance that a savings account customer needs to maintain in a savings account. Banks may charge a penalty for non-maintenance of AMB. The minimum average monthly balance will vary among the different banks and account type. It can range from Rs. 500 to Rs.2 lakhs and more. Typically, accounts with higher minimum average balance account come with more benefits. So, if you open a regular savings account, you have to maintain an average monthly balance in your account. Banks may deduct a penalty from your account for the non-maintenance of the minimum average balance.
On the other hand, an instant digital savings account may or may not have any AMB. Digital savings account without a minimum average balance requirement is called an online zero balance savings account. Kotak 811 is one search digital zero balance savings account. Few digital savings accounts have a minimum average balance requirement that is waived off after making a minimum initial deposit, booking a Fixed Deposit or Recurring Deposit of a certain amount for a minimum time.
Initial deposit requirement:
We have seen that banks offering digital savings account can waive off minimum average balance requirement if you make an initial deposit of, say, Rs.10,000. An initial deposit is the first deposit that you make to open a savings account. Most regular savings accounts have an initial deposit requirement that new account holders have to open the bank account. However, most digital savings accountsdo not have any initial deposit requirement.
Know Your Customer(KYC) is a process to verify customers’ identify and reduce money laundering. So, to open a new savings account, you need to complete the KYC process, where the bank’s representative will verify the original documents. Banks will open the account after carrying out the due diligence.
In the case of a regular savings account, your KYC process is complete as you have to visit the bank and get your documents verified. So, you can carry out financial transactions as per your account limits.
On the other hand, as banks open instant digital savings account without any in-person verification, you have to visit the nearest bank branch or book an appointment to complete the full KYC process. KYC process can be carried out through biometric authentication or verification of documents. Digital savings accounts come with an initial maximum account balance limit of Rs.1 lakh and a maximum overall credit limit of Rs.2 lakhs in a financial year. Moreover, the account is valid for 12 months. After the full KYC, you can carry out banking transactions without any restrictions or limits and continue using the digital bank account.
Summary: In this article, we have seen the differences between regular savings and digital savings account. The account opening process of a digital savings account is instant and paperless. Moreover, a digital savings account may not have any minimum average balance or initial deposit. If you are looking to apply for a new savings account, you can apply for the best regular savings account online.
Kotak 811 is one of the best instant savings accounts with high-interest rates. You can click onopen savings account instantly online.