Should You Open a Zero Balance Savings Account?

As the banks aim to enhance the banking experience of their customers and stand out, they often offer new and innovative banking products. Take an example of the basic bank offering, the Savings Bank Account. Numerous banks offer a variety of Savings Banks Accounts. Among these is the Zero Balance Savings Account, which is gaining a lot of attention these days, especially due to the aggressive marketing and promotion by the banks.

While the Zero Balance Savings Account may sound appealing, it may not be the best choice for many individuals. This article elucidates the basics of the Zero Balance Savings Account, its pros and cons, and whether it can be a good choice for you.

What Is a Zero Balance Savings Account?

Typically, banks require account holders to maintain a Quarterly Average Balance (QAB) or Monthly Average Balance (MAB) for their regular Savings Accounts. The bank imposes a penalty for non-compliance when the account balance falls below the required QAB/MAB.

A Zero Balance Savings Bank Account, as the name implies, is an account where the account holder can freely manage their account without the obligation of maintaining a minimum balance.

A Zero Balance Account does not adhere to the QAB/MAB policy, eliminating the need for a minimum balance. This essentially makes it a "no minimum balance account," similar to a Basic Savings Bank Deposit Account (BSBDA).

The key distinction between a Zero Balance Account and other types of Savings Accounts lies in the concept of the QAB/MAB requirement for regular savings accounts.

What Are the benefits of a Zero Balance Savings Account?

The Zero Balance Savings Bank Account offers a range of benefits that distinguish it from other similar accounts:

1. No Minimum Balance Requirement:

As discussed, a Zero Balance Savings Account provides the main advantage of not needing to maintain any balance in the account. Account holders can utilise the funds in the account down to the last cent. This feature is particularly beneficial for salaried employees, students, and pensioners. Furthermore, not having to maintain a balance helps account holders avoid penalties for failing to meet the minimum balance requirements, which would be applicable in a regular Savings Account in case of any default.

2. Easy to Open:

Opening a Zero Balance Savings Account is quite an easy process. Traditionally, you can visit a bank branch and open an account, just like with other Savings Accounts. Alternatively, a simpler and faster method is to visit the website of your chosen bank, select the option for a Zero Balance Savings Account, and upload digital copies of your documents. In just a matter of minutes, your account will be ready for use.

3. Mobile Banking and Net Banking:

For individuals with hectic work schedules and senior citizens who are unable to go to a bank branch physically, the convenience of mobile banking and net banking is invaluable. These features bring banking services right to your fingertips, making them easily accessible with a few clicks on your mobile phone or laptop. This is a significant advantage of a Zero Balance Account that attracts many customers.

4. Easy Transactions:

Effortless transactions are another benefit offered by a Zero Balance Account. With the help of net banking and mobile banking, individuals can make payments through this account. It enables quick payment of common utilities such as phone bills, electricity bills, OTT and dish recharge, mobile recharge, and more, all within seconds. Furthermore, you can also activate and use UPI (Unified Payment Interface).

5. A Virtual Debit Card:

Numerous banks provide the option to open a free online Savings Account that includes a virtual debit card at no cost. These virtual cards can be used for all your online purchases and bill payments, offering a convenient and secure method for digital transactions and eliminating the need for a physical debit card.

6. Reaping Rewards and Bonuses:

Another noteworthy benefit of opening a Zero Balance Account is the rewards and bonuses offered. As an account holder, you become eligible for additional perks with each transaction, including discounts and cashback offers.

7. Competitive Interest Rate:

Despite being categorised as a Zero Balance Savings Account, you have the opportunity to earn competitive interest rates on your savings. This enables your funds to grow and better meet your financial needs.

8. Establishing E-mandates:

With a Zero Balance Savings Account, you, as the account holder, can set up e-mandates for all your recurring expenses, encompassing payments such as credit card bills, EMIs, and utility bills, among various others.

Should You Open a Zero Balance Savings Account?

While a Zero Balance Savings Account relieves you of the burden of maintaining a monthly average balance, it is essential to thoroughly examine all aspects of the account before making your decision.

The introduction of the Zero Balance Account aimed to make banking accessible to a wider audience, offering fundamental banking services. Hence, if you already have a Savings Bank Account, these accounts may not offer any added benefits to you.

While Zero Balance Savings Bank Account offers basic banking services like ATM transactions, FD (Fixed Deposit), RD (Recurring Deposit), mutual fund investment, or Demat account facilities, it usually comes with restrictions on the number of free transactions and withdrawals allowed each month. If the total transaction amount or the number of withdrawals exceeds this limit, you may incur additional charges imposed by the bank, depending on the type of transaction.

Given these considerations regarding a Zero Balance Bank Account, it is crucial to select the most suitable account for your needs.

To conclude:

It is advisable to evaluate your financial requirements and make a well-informed decision accordingly. Additionally, irrespective of the type of Savings Bank Account you choose to open, make sure you select a banking institution that not only offers the standard benefits of this account but also assists you in achieving your financial goals.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.