How to Calculate Your Savings Account Interest

Posted on Wednesday, January 10th, 2024 | By IndusInd Bank

Savings are crucial for our financial well-being. While there are various options for saving money, a savings account is one of the most commonly sought-after products. It provides a secure way to keep your funds while offering interest on your account balance.

A savings account has many beneficial features. You can withdraw cash, make purchases online, and pay with a debit card or cheque, among other things. The most important feature of a savings account is that you earn interest on the funds in your account.

Let us delve into this article to understand how to calculate savings account interest and how a high interest rate can accelerate the journey towards your financial goals.

Interest rates on savings account

When you deposit money into a savings account, you earn interest on your balance. Basically, the bank pays you this interest for choosing to keep your funds with them. The amount you receive depends on the rate of interest and the balance in your account. The rate of interest and how frequently it is credited (monthly, quarterly or yearly) depends on the bank’s policy.

It is important to know the interest rate on your savings account. This will help you gauge the amount of interest you will earn on the money stored in your savings account. You can increase your savings through the power of compounding. Compounding takes into account the principal amount and the interest earned on the principal. You can benefit from the compounding effect to multiply your money at an accelerated rate.

How are savings account interest rates calculated?

The Reserve Bank of India (RBI) sets guidelines for savings account interest rates. The interest you earn may differ from another customer based on account balance and the type of savings account.

For instance, IndusInd Bank offers multiple types of savings accounts with attractive interest rates. Also, whether you earn interest monthly, quarterly, or semi-annually, depends upon your account type.

When is savings account interest usually credited?

Interest on savings accounts is typically credited quarterly or semi-annually. The RBI encourages banks to credit interest at the end of each quarter to promote savings and inculcate the habit of saving money among customers.

Savings account interest calculation

To know how much interest you will earn on your savings account, use the following formula:

Daily balance x rate of interest x (number of days / 365 days) 

Let us look at an example to understand this better.

Suppose you open a savings account with IndusInd Bank on 1st September. You deposit ₹1,00,000. The interest rate offered by the bank is 4% p.a. On 15th September, you withdraw ₹20,000. Then, On 22nd September, you deposit ₹15,000 to your account. You do not make any transactions for the remainder of the month.

Let us now calculate the closing balance for your savings for the last 30 days. 

Now, let us use the above-mentioned formula for interest calculation:

Thus, you earn ₹308.47 as interest at the end of the month at an interest rate of 4% p.a.

Now that you know how savings account interest is calculated, let us understand the benefits of applying for a savings account with IndusInd Bank.

Key features of IndusInd Bank Savings Accounts

• Opening an IndusInd Bank Digital Savings Account is a 100% digital process. This allows you to complete the application from the comfort of your home.
• The process involves minimal documentation. All you need is your PAN and Aadhaar details to complete a quick video KYC procedure.
• You get to pick your unique account number via the MAMN (My Account My Number) facility.
• You can monitor your account balance and make transactions using the IndusMobile app.
• The minimum eligibility criteria for IndusInd Bank Savings Account are:
  • Valid Aadhaar number linked with your mobile number
  • Physical copy of PAN card
• You get exciting deals and discounts on shopping using the debit card associated with the savings account.
• Depending on the type of account you choose, you get added benefits like a dedicated Relationship Manager for all your financial needs, personalised wealth management solutions, discounted lockers, and much more.
• You can use banking services via mobile, internet, WhatsApp, Alexa and even Facebook.

Steps to open an IndusInd Bank Online Savings Account

1. Pick an account number of your choice via the MAMN facility. This feature allows you to personalise your bank account and choose an account number you can easily remember.
2. Provide details such as your name and mobile number.
3. Complete the video KYC process from the comfort of your home.
4. Once the bank verifies your details, you can add funds to start earning interest.
   

Conclusion

A savings account is a reliable and secure way to store your money while earning consistent interest. A high-interest savings account is a means to achieve your financial goals, no matter short-term or long-term. A savings account is a good investment as it offers guaranteed returns, regardless of the market situation. With an IndusInd Bank Savings Account, you can enjoy competitive interest rates. The bank offers multiple savings account options tailored to your needs. To open an IndusInd Bank Savings Account right away, click here!

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.