What is the bank rate?
The bank rate is the rate at which the central bank lends money to commercial banks. But, as customers, you would be more interested in bank interest rate on your savings account. Assuming that your bank offers 4% interest on your savings account, you will receive ₹100 at the end of the quarter on an average balance of ₹10,000.
The higher the interest rate, the higher your income from your savings account balance. Besides, the frequency also matters. If the compounding occurs half-yearly, your interest income would be less. Most banks calculate the interest quarterly, as shown in the above example. IDFC FIRST Bank Savings Account interest is credited monthly, leading to even faster compounding.
The right savings account maximises your finances
If you are looking for a new savings account, here are a few factors to consider –
Go for a bank that offers a high-interest rate. It will directly result in higher income.
Ensure that the banking services that you regularly use attract minimal charges or none.
Choose an account whose minimum balance requirement is as per your convenience.
The savings account and its features must match your financial goals and expectations from the account.
Digital banking, an all-in-one mobile banking app and customer support are facets that make a savings account user-friendly.
Banking 101: What is interest?
Whether you’re trying to make a purchase, pay off an existing loan, or build credit, borrowing money may be a great solution. Before you commit, it’s important to understand the terms of the loan, specifically the interest.
So, what is interest? Interest is money charged by a financial institution for the service and benefit of borrowing money. When a bank or lender extends a line of credit to a borrower, they are taking a risk and interest can be thought of as a service fee for this risk. Interest rates can vary based on the creditworthiness of the borrower.
Any legitimate lender is required to disclose the terms of a loan before you agree to borrow money but understanding (and sometimes deciphering) those terms can be a challenge.
Below we guide you through three types of interest to give you an advantage in making informed decisions about which loan is right for you.
Sometimes referred to as “regular” interest, simple interest is the amount of interest due on a loan.
For example, if you borrow $1,000 at a 3% fixed annual interest rate, you will pay $30 in interest per year. When considering any loan, it’s important to know if the interest rate is fixed or variable.
Another factor to be aware of with a simple interest loan is if there are any penalties for early payoffs. Without these penalties, you can save money on interest by paying off your loan before it is due in full.
A good way to think of accrued interest is to equate it to the time in a payment period. As time in the period increases, so will the amount of interest that is owed or “accrued.”
For example, if the amount of interest that you’re charged each month is $30, you’re paying $1 per day in that period until the money is paid back. If the lender is paid on the 24th of the month, the amount of interest will be $24.
Compound interest occurs when the principal (or original amount borrowed) and the interest are combined to create a new balance. The new balance is then used to determine an interest rate to be charged. This type of interest is referred to as “interest on interest” as it is compounded.
Compound interest rates are most often attached to credit cards, which have variable rates. Be sure you’re aware of what the various rate boundaries, especially the maximum you can be charged.
Westfield Bank is personally invested in your banking success. Since our founding in 2001, we’ve embraced the idea that sharing knowledge with every customer we serve builds trust and ultimately promotes your financial growth.
Banks in countries like Denmark and Japan strangely have zero or even negative interest rates. People in those countries would not ask the obvious question while opening a savings account - what is the bank rate?
But in India, the most important task while opening a bank account is to check what bank rate is being offered. You can earn a high return on your savings account deposit, depending on RBI’s prevailing bank rate policy. So, you must make sure that your savings account is cascading the benefit of RBI’s high repo rate.
IDFC FIRST Bank Savings Account - a gamechanger
You must have understood by now that a higher rate of interest translates into a higher return on your account balance. Similarly, frequent interest credits lead to faster compounding, helping you achieve your financial goals sooner.
IDFC FIRST Bank Savings Account ticks the boxes on both these parameters. Its savings account bank interest rate is among the best in the industry and is comparable to even fixed deposit interest rates. But that’s not all! It also slashes down the costs that are typically involved in operating a savings account. IDFC FIRST Bank Savings Account offers zero-fee banking on all commonly used savings account services. This includes –
Also read - Build your emergency fund with some of the best savings accounts
Save more with a savings account
A savings account with an attractive interest rate will lead to more funds, while its monthly credit leads to faster accumulation. With zero-fee banking, you also get to keep this additional earning while enjoying banking services in a completely digital ecosystem. For these and many more exciting features, choose IDFC FIRST Bank Savings Account.
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