Can you earn interest with a Zero Balance Savings Account

As the term indicates, a zero-balance savings account is an ideal choice to save the costs of maintaining a minimum balance and managing the money. 

Yet, this raises the question of whether such bank accounts allow one to earn interest like a regular savings account. This guide will help ease any doubts about this convenient financial product while also giving you a better understanding of how Zero-Balance Bank Accounts work. 

Zero-Balance Saving Bank Account – What Is It?

A zero-balance account refers to a deposit account without any minimum balance. While there is the penalty or charge for maintaining above the minimum balance for savings bank account which is not the case in a zero-balance bank account wherein the individual can transact without any penalty. 

How does a Zero-Balance Bank Account work?

Zero-Balance Bank Accounts offer the same services as traditional Savings Accounts, such as ATM withdrawals, fund transfers, and Debit Cards, making them readily accessible.  

Do you get interest on a Zero-Balance Bank Account?

Yes, one can earn interest on a zero-balance bank account. Although there is no minimum balance requirement, banks generally offer zero-balance savings accounts where a holder pays interest on their daily balance held in the accounts. The rate of interest for zero-balance accounts varies widely by bank. While some banks offer higher rates to attract customers, others offer lower rates. Before you opt for an online saving account opening zero balance, it will help you compare the interest rates the banks offer. Generally, the interest for Zero-Balance Bank Accounts is computed on the daily balance and paid out quarterly.  

Difference between a traditional Savings Account and a Zero-Balance Bank Account 

Features	Traditional savings bank account	Zero-balance savings bank account
Minimum balance requirement	Requires a minimal balance, depending on the bank. Balance ranges from ₹500 to ₹25,000	Requires no minimum balance
Initial funding	The customer is required to deposit an initial amount to open an account	The customer may or may not have to deposit cash while opening a zero-balance account
Physical Debit card	The bank kit comes with a physical debit card	The bank kit may come with a physical or virtual debit card
Transaction limitations	No limit to the number of transactions	A zero-balance account may have a limit to the number of transactions, following which the customer may be charged for transactions
Foreign remittances	Allows foreign remittance	Does not allow foreign remittances

Wrapping it up 

Zero-balance savings accounts are popular because they relieve the minimum balance pressure and allow you to earn interest on the funds deposited. Despite some similarities to traditional Savings Accounts, including providing Debit Cards and interest accumulation, Zero-Balance Savings Accounts are unique in allowing constant access without worrying about penalties for maintaining a low balance. Comparing interest rates and account features of various banks when considering opening a Zero-balance account will help you make a better decision.