The average middle class has the same saving story. We want to save money and keep it safe for future use. Saving money is not a bad choice and spreading your savings into many bank accounts is definitely menacing. Many people maintain more than one bank account for various purposes which can prove to be of loss.
Sometimes, one account is for bigger savings, one account
functions as the salary account and sometimes another one account for the joint
savings with the spouse. It might sound very exciting that one person has many
bank accounts and which might also mean more savings. But this notion needs a
People open multiple accounts with various banks to avail some of the best services available like buying a house, child?s education, market investments, and so on. People open bank accounts and then forget about them. According to the World Bank?s Findex report, almost half the population of India holding one or more bank account had a bank account that remained inactive for more than a year.?
One fact to keep in mind is that one has to maintain a certain
minimum balance amount in each account.
Non-maintenance of the minimum balance also attracts a penalty. It
simply means that if you are having 4-5 saving accounts then Rs.25,000-50,000
of your savings will be locked in different bank accounts as the minimum
Banks issue debit cards with savings accounts and that service is
availed at an expense. No matter if you use one particular account or not, you
still have to pay the service charges. And in some cases if your salary account
is not in use for more than 3 months or so, then the bank turns it into a
normal savings account from a zero balance account. It requires you to maintain
a minimum balance in that account as well.
The rate of interest for the savings account remains at 3.5-4.0% per annum for most Banks. If this money is put in the Fixed Deposit then the same money fetches a higher rate of returns. Banks consider a savings account as dormant if the account is inactive for 2-3 years. In such scenario, you have to run to the bank for using that account. Multiple accounts haunt you when you submit the tax returns or when your brain fails to mug up all the cards and access pins.
If you intend to earn higher interest from small private Banks (like
Small Finance Bank) while remaining within Rs. 1 Lac deposit insurance limit of
Deposit Insurance and Credit Guarantee
Corporation, you may keep Fixed Deposits spread across few Banks.
However, it is better to maintain less number of Savings accounts.
Key Disadvantages of Multiple Bank Accounts
To sum up, it is not advisable to keep multiple
saving accounts with different Banks because of the following reasons:
A good part of your
savings would be locked as minimum balance requirement.
Not maintaining the
minimum balance may cause you to suffer penalty
Loss of interest rate
on Savings (Savings carry lower rate of interest compared to Term Deposits)
accounts may create confusion in making transactions
Filling tax return
turns out to be a tedious task
Financial experts suggest that the number of saving accounts
should be reduced to one or two or max three. A person should have one salary
account and one main savings account. The salary account may be the temporary
account; changing every time you change a job. If a person needs to really
segregate the savings then the person may even use three savings accounts. One
account could be the main savings account, one joint account with family or
spouse and the last one may be the salary account. Always put standing
instruction (wherever possible) for auto-sweep into Term Deposit whenever the account
balance crosses a threshold.
It is always advised to restrict the number of accounts to;
Put money at better
Avoid the confusion
of maintaining minimum money and pin records