Getting the first job is a milestone achieved. Nowadays, most employers insist on a bank account with a particular bank where the employer would credit the salary. For many millennials, it is one of the many ‘to do HR formalities’. Experts, however, look at it as an important step in the journey towards financial freedom. A savings bank account is an enabler and, if used wisely, can give you a head-start. Here are some tips you can use.
Get the facts right
This may sound really stupid- but do check if your name and address is captured right by the bank. If there are any discrepancies, bring it to the notice of the bank. Corrections should not be postponed.
Do check with the bank if your mobile number and email id are recorded right. Since you will be getting transaction alerts and ‘one-time passwords’ sent by bank on SMS and email, you cannot afford to get them wrong. If the bank has registered your corporate email id in their records, do change it to your personal email id. This will ensure that you will keep getting bank’s communication on email even if your corporate email id changes or you quit the company.
Know the rules of game
Each bank will have its own set of rules about your salary account. Though these accounts generally come with zero balance norm, there may be charges if you exceed a certain number of transactions. After a certain number of free transactions at the ATM and branch, the banks typically levy charges on cash transactions. Do check the charges associated with bank drafts and online payments, too. These may come handy if you intend to make payments.
With each new account opened the bank shares the booklet containing important rules and regulations, as per the directives of Banking Codes and Standards Board of India. Preserve this booklet as it will enlist all charges and limits that come with your salary account.
Free demat account
Many banks offer a free demat account and a free investment account along with salary account. It is an industry-wide practice to offer a free demat account for the first year. After the first year, the demat account holder is expected to pay the annual fee in the range of Rs 400 to Rs 500. Even most stock brokers do not charge you in the first year for the demat account. So, there is nothing great about it.
Demat account is essential if you plan to invest in shares. If you plan to restrict yourself to mutual funds and fixed deposits, there is no need of a demat account. You mays simply refuse to open a free demat account. You can open it anytime you want in future.
If you have landed a well-paying job and your employer is in ‘A’ list, there is a high possibility that you will be offered a free credit card at the time of opening of a salary account. Please note the free credit card means that there will not be any annual charges for the first year. But the bank may charge you from the second year. Also, if you do not pay your credit card bills you are charged a heavy late payment fee along with steep interest charge. There are some credit cards that are free for life – which means they do not charge any annual fee. However, the user is expected to pay the credit card bill in full before the due date. Otherwise, the late payment fee and interest charge will nullify the benefit of zero annual fee.
If you decide to go for a credit card, do check the benefits first. If it does not suit your needs, you can give it a pass. “If you intend to go for one, understand the charges and resolve to be a prudent user of credit. Pay the credit card bill in full before the due date. It will help you build your credit score,” says Sukanya Kumar, Founder of RetailLending.com. To achieve this, sign a debit mandate with your bank which will enable the credit card issuing entity to collect the outstanding bill from your salary account. To ensure it happens, you will have to keep the right amount of balance in your salary saving bank account.
Use it optimally
“If you have an outstanding education loan, it is time to pay back. Opt for a standing instruction on your savings bank account to pay your EMI. You can also use the account to invest in liquid funds to park your short-term savings. Thus, you can create your emergency fund,” says Jignesh Shah, founder of Mumbai-based Capital Advisors