What is a Salary Account?

A Salary is a form of payment from an employer to an employee, which is usually specified in an employment contract. An account maintained by the employer to pay salary to the employee is known as Salary Account. Most banks in India, have salary accounts of individuals who work in different sectors. It is also known as Zero Balance Account.

Features of Salary Account

The following are the features of Salary Account:

• The employer opens the Salary account on behalf of the employee.
• The primary purpose is to credit the salary of the employee.
• No need to maintain a minimum balance in a salary account.
• No interest will be paid to the salary account.
• A salary account will be considered as the savings account if the salary is not credited for three consecutive months.

What is Savings Bank Account?

Savings Bank Account is a deposit account held at a retail bank which pays interest on the deposited amount, but it cannot be used directly as money in the sense of a medium of exchange. This kind of accounts has to set aside a portion of their liquid assets while earning a monetary return.

Features of Savings Bank Account

The following are the features of Savings Bank Account.

• The account's sole purpose is to encourage savings among the people.
• Anyone can open a savings bank account.
• The depositor has to maintain a minimum balance in the account.
• It earns interest rates on the savings amount.
• Overdraft facility is not allowed in a savings bank account.
• It is ideal for a salaried person.

How To Convert Salary Account To Savings Bank Account?

An employer will credit the salary to the employee's bank account on a monthly basis. If the salary is not credited to the employees' bank account continuously for more than three months, then the salary account will be treated as savings bank account. The bank will consider the account as savings bank account, and all the rules and regulations which apply to a savings bank account will henceforth apply to such salary accounts which get converted to savings bank account.

Post Conversion

Though the agreement of a salary account lies between the bank and the account holder, post-conversion the salary account will no longer offer the individual the same benefits.

Salary account and your new job

Before converting your old salary account into a savings account, check with your new employer if it would allow you to continue keeping your existing salary account. This is possible if the new organization also has accounts with the same bank as your old employer. If possible, this will save you some paperwork that you will have to submit to open a new salary account, as well as another account to manage.

Do you need another savings account?

If your new employer does not have a bank account where you previously had your salary account, think about it, whether or not you want to create an additional savings account for this salary account. Now there are two ways to do this. If your previous salary account was the first account you have ever held, it is advisable to convert this salary account into a regular savings account. In this way, you will have a savings account in addition to your existing salary account where you can receive credits from other sources and make payments for your investments such as systematic investment plans (SIP), EMI for a loan or insurance that you may have taken out.

Things To Remember

Few things which an account holder has to remember before conversion of Salary to Savings Account are as follows:

• Minimum Balance Requirements 

Savings accounts usually require the holder to maintain a certain amount known as minimum account balance in the respective savings account. Whenever you are converting a salary account to a savings bank account, it's better to check beforehand the minimum balance requirement for maintaining the account. It is essential because banks levy heavy charges as penalties if the minimum balance is not maintained in a savings bank account. The minimum balance to be maintained in a savings bank account varies across all the banks in India.

For Example, Private banks like Axis Bank requires the holders to maintain a minimum balance of Rs 10,000. International Banks, like Standard Chartered, requires the account holders to maintain a minimum balance of Rs 25,000.

Number of Branches and ATM's

One of the primary factor which influences the choice of bank is accessibility. Before considering to convert salary account to bank account, one has to find out if the bank has accessible branches and ATM network. It is required for the convenience of secure banking especially in times of urgent requirement.