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Salary accounts are opened by employers to credit the salary of their employees. Usually, these accounts are active in the same bank where company conducts its banking transactions. Savings accounts, on the other hand, are opened by individuals with the bank of their choice.
Some positives of a salary account are:
1.Zero balance requirement
2.Free drafts
3.Free pay orders
4.Zero annual or issuance charges for debit cards
However, as the agreement of salary account is between the employer and the bank, the extra benefits that come with this account cease to exist after you switch your job. Usually, banks convert the salary account into a savings account if the salary credit does not take place for three consecutive months.
We present some points that you need to watch out for, in case you decide to convert your old salary account into a savings account.
1.Salary account relationship in the new job: When converting your old salary account into a savings account, check whether your new employer has a salary account agreement with the same bank as your previous employer. If it is the same bank, you can continue with the old salary account instead of converting it into a savings account.
2.Need for additional savings account: If the salary account with the new employer is with a different bank, then think whether you need an additional savings account. If your old salary account was the first account you ever had, I suggest you continue with that account as a regular savings account. While the salary account with your new employer can always perform the function of a savings account, keep an additional savings account where you can receive payments or credits from other sources. You should ideally use the savings account for making payments for systematic investment plan (SIP), loan EMIs or unit linked insurance plans (ULIPs).
3.Minimum balance requirements: Now that you are opting for an additional savings account, look at the minimum balance requirements that you will have to maintain when converting your salary account. For examples, ICICI Bank and Axis Bank have minimum balance requirements of Rs. 10,000 for a regular savings account in metro and urban locations whereas Standard Chartered requires Rs 25,000 for its regular savings account. As the penalties for non-maintenance of minimum balance can be quite high, you should carefully consider the minimum balance requirements before you convert your salary account into a savings account.
4.Branch locations: Although most of the banking transactions can also be made through internet and mobile banking, there are many services that can only be availed at bank premises. This is where the importance of the location of the branch comes into play. For your own convenience, the bank branch should be ideally located either near your office or your residence.
5.Branch and ATM density: You should only convert your old salary account into a savings account if that bank has a good branch and ATM network, especially in places you frequent. This can save you from the headache of carrying cash with you. Also, if an urgent need arises, you can easily go to a branch or an ATM. ICICI Bank, HDFC Bank, SBI and PNB have good pan-India branch and ATM networks.
6.Change in communication address: Many a times, your communication address in your salary account would be that of your workplace. The communication address is the one where the bank would send you the physical monthly statements, cheque books, debit card pins, new debit card or internet banking pins. Therefore, do remember to change your communication address once you leave your present employer.
