Earning Under 3%? Why It's Time to Move Your Idle Cash

With savings accounts losing value, here's where to park your cash for high returns, liquidity

- Neil Borate & Anil Poste

With HDFC Bank and Axis Bank slashing their savings account interest rates to just 2.75%, and State Bank of India (SBI) offering an even lower 2.7%, the money sitting "safely" in your account might actually be losing value in real terms, thanks to inflation. It's time to ask: is your bank balance truly working for you?

In this article, we explore smarter, safer, and more rewarding alternatives to traditional savings accounts—without compromising on liquidity or peace of mind.

Switching banks Harshad Chetanwala, co-founder of MyWealthGrowth.com, emphasizes that the primary considerations for alternative investments should be safety and liquidity.

There are banks outside the realm of large public and private ones that offer higher savings interest rates. For example, IDFC First Bank offers a 7.25% rate on balances above 10 lakh.

However, be aware that this has a graded structure. Balances below 15 lakh earn just 3% and those from 15-10 lakh earn 5%. So, even someone with a balance of 10 lakh will essentially earn a weighted average rate of 4%.

It is possible to find other banks with higher rates, but this involves both the hassle of opening a new bank account and the risk of the bank failing. Money up to 15 lakh per customer is insured under Deposit Insurance and Credit Guarantee Corporation rules.

Traditional fixed deposits Fixed deposits (FDs) offer a tempting alternative to low savings account rates, with yields as high as 8%.

However, this higher return comes at a cost: your money is locked away, and breaking the deposit early triggers a 1% penalty. Moreover, these rates may fall with potential future RBI rate cuts. "If you break a one-year FD early, you'll likely receive lower returns compared to liquid funds," Amit Sahita, director of Fincode Advisory Services explains.