A Savings Account is a popular banking facility. The primary reason for this lies in its interest-bearing feature. As the holder deposits funds into the account, they get the opportunity to earn interest.
But to enjoy this perk, it is wise to know the factors influencing Savings Account interest rates. Such knowledge gives you an idea of how much you can garner through your deposits. So, here is a list of a few of them:
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Closing balance
This is the amount left in your account by the end of every accounting year. This amount further affects the interest rate. For example, if your closing balance is low, it may decrease the interest rate. Likewise, you reap a better interest rate if you maintain a high balance. Therefore, you should consider this aspect. Track expenses and use the funds in your Savings Account.
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Bank policy
Every bank operates on a different policy to carry out its activities. This significantly impacts the interest rate structure. To put this into perspective, some banks offer high interest rates, while others may not. This is precisely why you should be careful when selecting a banking partner. If you are to open a Bank Account, ensure you read through the concerned bank’s policies and terms.
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Economic conditions
The economic conditions of the country dictate the banks’ policies. As a domino effect, your Savings Account interest rates get affected. For instance, if the economy is not doing well, you might not experience high interest rates. Although this factor is not in your control, staying updated about the same is advisable. It enables you to predict changes concerning your Saving Account interest rates.
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General wages
A change in the general wage rates also determines interest rates. If there is a rise in wages, there will be a rise in interest rates. This is because of the increase in disposable income. You maintain larger amounts in the account when you have more disposable income. As a result, your closing balance increases over time. Check it through your Banking app to see for yourself.
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Demand & supply
Demand and supply dictate the course of every transaction in the economy. Shifts in the demand or supply of Loans and credit affect the interest rates. They direct banking policies. For example, if the need for Personal Loans increases, the interest rates go higher. Likewise, if the supply of credit increases, you witness a decline in interest rates.
Purpose of interest rates
A Savings Account is equivalent to a partnership. You establish a deal with your banking partner when you open the account. When you start depositing money frequently, you indirectly help the bank. The bank uses the funds to entertain other customers by borrowing them temporarily. To appreciate this unsaid favour, the bank offers you interest rates.