An employer or salaried employee often opens a salary account to deposit or receive monthly paychecks.
Most of the employed personnel have two types of accounts. One is a salary account and the other is a savings account. These accounts, while similar in some respects, are different from each other. The similarities may include benefits, online banking capabilities, chequebook, debit card, etc. But the distinctions are quite significant.
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A salary account is an option for saving money that is provided to members of the salaried class where the employer deposits the employee’s monthly salary. Employers use these accounts to provide incentives, pensions, reimbursements and more in addition to the regular paychecks. Employees also receive extra benefits such as free debit cards, promo codes and more.
A savings account is one where anyone, employed or otherwise, can deposit money and withdraw it at any given time. Cash that isn’t regularly required can be kept in the account for security. Some banks even provide customers with compound interest on the balance of these accounts.
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Differences between savings and salary accounts:
An employer or salaried employee often opens a salary account to deposit or receive monthly paychecks. However, a savings account is one where people can deposit their money without the need to be employed.
While there is no requirement for a minimum balance in a salary account, savings accounts often come with a requirement of maintaining a certain minimum balance. The bank has the right to charge the customer with a penalty if the owner of the savings account does not have the required amount in the account.
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The rate of interest provided can vary based on which bank you have the salary or savings account in. While most banks offer similar rates for both types, some banks may provide higher interest rates to savings account holders to promote saving money.
If a salary account is not credited with a salary for a specified period, typically 3 months, the account automatically switches into an ordinary savings account. However, to convert a savings account into a salary account, the bank needs to allow it. If your new employer has a partnership with the bank, it is easier to convert your savings account to a salary account.
