Last Updated – 28 Aug 2018

Which bank gives the highest interest rate on a savings account?

SBI saving account interest rate is 3.50% only.

Kotak Bank shows me 6%.

Yes Bank offers 7.1 reduced to 6%.

Do you really get that much?

Then which is the best saving account?

Let’s compare the savings accounts:

Not exactly! We are not comparing savings account interest rates but best interest rates.

Some of the private banks started offering more interest rate on the regular saving account after RBI deregulated interest rates.

I will tell you how banks are fooling people with marketing…

.. when you can still earn more than 7% interest with any bank saving account (And it is no more a secret).

You guessed it right, high yield savings account.

Look at the * condition of Kotak Bank

Yesbank updated their conditions and now giving 6% to everyone with deposits less than 1Cr.

Note Kotak Bank will never give you promised 6% interest. Effective interest earned on savings account in above example less than 6%. 

Tell me who keeps 5 Cr in saving account? No one!!

Then, where is the best saving account interest rate?

Where is the secret of earning more than 7% savings account interest rate?

Here! You can convert your saving accounts into a high interest yielding savings accounts by:

Option 1: Deposit in FD

You can open Fixed Deposit with any bank, earning interest between 8.5% to 9.5% 7.5% (updated in Nov 2016).

Well, you already know this option. Your money will be locked for the tenure of FD and you may need this money anytime. You don’t want your money to be locked by your bank, right?

Option 2: Auto Sweep-in / Sweep-out saving account

Sweep-in accounts are saving accounts which give extra benefit of fixed deposit. Many banks offer auto sweep saving accounts with different names.

• ICICI Bank Money Multiplier
• SBI Saving Plus Account
• HDFC SavingsMax Account
• PNB Prudent Facility
• Union Bank – Union Flexi Deposit
• Oriental Bank of Commerce – Flexi Fixed Deposit
• Allahabad Bank Flexi-fix Deposit
• Axis Bank Encash 24 Flexi Deposit

How does sweep account work?

Banks set minimum amount (10,000 to 25,000) which earn 4% interest. Any amount over the threshold limit will automatically convert into small fixed deposits in multiple of 1000 or 5000 depending upon the bank.

You can withdraw amount by ATM or Cheque as regular transactions. Your fixed deposits will automatically be liquidated when your amount goes below the threshold limit. Banks break FD automatically in a First-In-First-Out or Last-In-Last-Out manner.

 

Option 3: Manual sweep-in facility with regular Fixed Deposit

You can select a sweep-in option when opening regular FD. Almost all banks provide this facility.

Some banks allow you to convert your regular FD into sweep-in accounts, like HDFC.

Disadvantages

• • You have to pay the penalty on interest if you are utilizing funds over the limit. Normally 0.5 to 1%, but 8% is still better than 7%.

• • You have to open and break fixed deposits in case of manual sweep-in. Some effort but worth for earning more money. You can open auto sweep-in FDs to avoid the hassle.
• The amount under threshold limit earns only 4% interest. You can choose a bank with a minimum threshold limit (most of the public banks).

Conclusion

Savings account interest rates can be made high-interest savings accounts.

Select threshold limit equal to your 2 months expenses so that you can avoid sweep-out penalty. I am sure you will earn a higher interest rate and some extra money with this smart move.