Breaking the myth: Can you spend from a savings account?

Savings accounts are one of the most basic banking products used by millions of Indians. However, a common myth is that savings accounts are only meant for parking money and not for spending. But is this true? Let's analyze if you can use your savings account for expenses and under what circumstances.

The origin of the myth

This myth stems from how savings accounts were positioned traditionally as just a place to build deposits and earn interest. Spending needs were met from current accounts or cash. So, savings accounts got associated only with savings. But today's digital banking has changed norms. Follow the guide to reap the maximum saving account benefits.

Reasons you can spend from savings accounts

Higher withdrawal limits

Earlier, RBI restricted monthly cash withdrawals from savings accounts. But today, these limits are relaxed, allowing easier access to cash. Most banks now allow unlimited ATM withdrawals.

Debit card issuance

Initially, only current accounts would get debit cards for spending. But debit cards are now commonly issued against savings accounts too by all major banks. This enables POS and online spending directly from savings accounts.

Digital payment options

Payment apps and wallets can be linked to savings accounts, allowing easy mobile-based spending from them. UPI, net banking, e-mandates further enable this. No need for a current account anymore for digital payment options.

Linked overdraft facility

Many banks allow overdraft or OD facility in savings accounts up to a sanctioned limit. This allows temporary debt if required for spending needs.

Financial inclusion focus

RBI's push for financial inclusion has led to basic no-frills savings accounts with RuPay debit cards. This focuses on using savings accounts for both deposits and withdrawals.

When spending from savings accounts makes sense

Limited transactions

If monthly transactions are fewer, then a savings account suffices instead of a current account. Current accounts usually need higher average balances.

Retail spending needs

For individuals and households, savings accounts can be used for retail expenses if monthly spending is within withdrawal limits. No need for multiple accounts.

Students and minors

Students who get monthly pocket money and minors getting regular allowances can spend from savings accounts opened in their name using debit cards.

Situational spending

Sometimes, savings accounts come in handy for situational spending needs when required, especially if there are delays in transferring funds from the primary spending account.

Emergencies

In emergencies, if the primary account has insufficient funds, savings accounts can provide a backup payment option for critical spending.

Things to keep in mind

The following caveats apply when using savings accounts for spending.

• Avoid overdrawing beyond overdraft limits to prevent penalties.
• Maintain minimum balance requirements.
• Manage debit card limits if spending frequently.
• Monitor transactions to prevent fraudulent use.
• Do not use it for heavy commercial transactions.

Conclusion

The notion that savings accounts are not meant for spending is largely a myth today. Savvy usage of savings accounts along with discipline ensures smooth management of both savings and spending needs conveniently from one account.