The account into which the salary of the employees gets credited is referred to as the salary account. It is a specialized account that has been created only for crediting the salaries of the employees. These accounts serve to be convenient modes for organizations to pay salaries to their employees, and these accounts also come with a plethora of features for both the employees and the employers alike.
The ultimate aim of these accounts is to facilitate the seamless transfer of the monthly salary amount from the employer to the employee. Employers will generally have tie-ups with specific banks to make this process convenient for both them and their employees. Individual employees cannot independently open salary accounts, but can be created only through a partnership between the bank and the business. Let us discuss the advantages and disadvantages of salary accounts in detail here.
Advantages of Salary accounts:
1. Zero Minimum Balance
The best feature of having a salary account is its zero minimum balance feature. Thus, salaried employees need not worry about maintaining their balance in the account above a certain limit. Even if their bank balance is zero, they will not be levied any penalty. This feature also offers employees the flexibility to manage their money better.
2. Internet Banking and Phone Banking Services
Salary account holders can send and receive funds from anywhere in the world through their salary accounts. This eliminates the need for cash withdrawals and cheque deposits to complete the fund transfers. Most banks now also offer phone banking services that help account holders manage transactions from the comfort of their homes.
3. Cheque Book and Debit Cards:
The employees of the companies will also be given debit cards along with the salary account, which they can use seamlessly for cash withdrawals and deposits at the ATMs. They can also use their debit cards for online and offline payments. If they prefer to make cheque payments, they can also avail cheque books free of cost from the bank.
4. Bank Loans:
Salaried employees of a company getting their salary through their salary accounts can gain instant access to a wide range of loans. They can avail of car loans, personal loans, home loans, etc. from the same bank in which they have their salary account through a simple documentation process. Availing of these loans through the salary account also makes it easier and faster. Interest rates for these loans are also more competitive for the existing account holders.
5. Investment Services:
Holders of salary accounts in a bank can easily invest in mutual funds, insurance products, government bonds, etc, through their salary bank account. They can also link their salary account with their demat account for trading and stock investments.
6. Credit Cards:
Employees with salary accounts can avail of credit card services easily. The amount of credit granted will depend on their annual compensation from the company and their credit score.
Disadvantages of salary accounts:
1. Limited Flexibility:
Salary accounts may not offer the same flexibility as other savings accounts, such as allowing making investments through the account, opening multiple accounts, etc. There could also be restrictions on the number of transactions allowed through the account in a month.
2. Fees:
Some salary accounts may levy charges for certain services such as overdraft protection, check writing, etc. Some accounts may also levy fees for exceeding the number of transactions.
3. Less Interest Rates:
The interest rates for the savings amount offered by the banks on the salary account could be low compared with other savings accounts and even fixed deposits. Thus, this reduces the potential returns on saving money in the salary account.
4. Limited Investment Options:
Some salary accounts may not offer investment options for the employees who are holding them. For instance, the employees may not be free to invest in stocks, bonds, mutual funds, etc., and this limits their potential for earning any additional income through these accounts.
5. Minimum Balance:
Some banks might expect the employees to maintain a minimum balance in their salary accounts. This might be difficult for individuals with low incomes and those with no fixed and regular salary structure.
Comparison table for the advantages and disadvantages of salary account:
| Advantages of salary account | Disadvantages of salary account |
| Salary will get credited into these accounts without any delay. Automatic payment options are available for paying bills and loans. | There might be some limitations in the features compared with other premium accounts. |
| Generally, zero balance maintenance is entertained in salary accounts. But this feature is available only if the salary gets credited regularly. | The bank might levy penalty charges if the salary is not being credited for a certain period, for example, in the event of job loss or job change. |
| Salary accounts have easy access to loans and credit card facilities with pre-approved offers. The user might also have a preferential interest rate on credit cards and loans. | Owing to easy access to loans, there might be a tendency to over-reliance on credit. |
| Salary accounts offer additional benefits such as accidental cover, free insurance, and other discounts on financial products. | Some of these benefits might have limited coverage or levy additional conditions. |
| Enhances digital banking services such as Internet banking, mobile banking, etc. The account might also have a dedicated helpline service. | Dependency on digital channels could be quite challenging for non-tech-savvy employees. |
| Some of the benefits that are associated with the salary accounts could be employer centric. These services include better customer service, zero balance requirements, etc. | Some of these benefits might come to an end if the employee changes his place of work or losses his job and doesn’t get his salary credited into his account. |
| Salary accounts generally feature high-security features to safeguard the savings and the online transactions that the employee makes. | These security features, however depend on the infrastructure of the bank, and any breaches in the same can negatively affect the account of the employee. |
Frequently Asked Questions
Q1. How does a salary account provide convenience?
Ans: Salary accounts offer online banking, mobile banking, and ATM services, making it easy to access funds and conduct transactions at any time.
Q2. What special offers are available with salary accounts?
Ans: Banks often provide special offers on personal loans, home loans, and car loans. They may also offer discounts on insurance premiums and exclusive deals on shopping and dining.
Q3. What happens if my salary is not credited to my salary account for a few months?
Ans: If your salary is not credited for a specified period (usually three months), the bank may convert your salary account to a regular savings account, which could have different terms and conditions, including a higher minimum balance requirement.
Q4. Should I convert my salary account to a savings account when I change jobs?
Ans: It depends on your new employer’s banking arrangement. If the new employer uses a different bank for salary disbursements, you may need to open a new salary account with that bank. However, if you want to maintain the existing account, you can convert it to a regular savings account, keeping in mind the terms and conditions.
Q5. Can I have multiple salary accounts?
Ans: Yes, you can have multiple salary accounts if you have multiple employers. However, managing multiple accounts might be cumbersome.
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