Many people love to have multiple bank accounts owing to one reason or another. This may be a good idea in some cases, like if you are a businessman and your transactions are huge. However, for a salaried person or a normal human being, having multiple bank accounts hardly makes sense.
Many people love to have multiple bank accounts owing to one reason or another. This may be a good idea in some cases, like if you are a businessman and your transactions are huge. However, for a salaried person or a normal human being, having multiple bank accounts hardly makes sense – particularly in the wake of growing bank transaction and maintenance charges as well as keeping in view the ineffective use of cash and hosts of other issues.
Here we are taking a look at some important reasons why you need to consolidate or eliminate your old or surplus bank accounts:
# Minimum Balance
Most savings accounts require you to maintain a minimum monthly balance. This could be as high as Rs 25,000 for some banks in urban areas, while for others, this is usually in the range of Rs 5,000-Rs 10,000. Thus, the more accounts you have, the more cash you need to maintain in them as minimum balance. For instance, if you have five bank accounts, then you will be required to maintain at least Rs 25,000 as minimum balance, unless those are zero balance accounts. However, remember that even your zero-balance salary accounts automatically get converted into regular savings accounts once you change your job and create a new salary account. Then these accounts will need the minimum average balance maintenance.
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# Beware Of Charges
Most savings accounts are not free. Therefore, you have to pay minimal charges towards services such as debit cards, SMS alerts, ATM use etc. In fact, service charges for non-maintenance of monthly average balance alone can go up to Rs 600 in some cases. Therefore, the more accounts you have, the more fees you have to pay from time to time. Moreover, if you have any irregularity in the account, then it also affects your relationship with the respective banks, which in turn may affect your credit score also.
# Ineffective Use Of Cash
Having to maintain minimum balance in several accounts means that you lose the opportunity to lock the same cash in more lucrative investment instruments such as FDs, mutual funds, etc. This means your money will keep on generating lower returns, which may be as low as 3-4 per cent in a majority of cases.
# Avoid Misuse
If you’re not in the habit of keeping a tab on your accounts, you may be at risk of having a dormant savings account. “Unscrupulous people may notice the account’s dormancy and find ways to misuse it, especially if the account has a balance. Even if that is not the case, you will be losing on interest,” says Adhil Shetty, CEO, Bankbazaar.com.
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# Ease of Tax Filing
Having too many interest and income-generating accounts means that your paperwork increases during tax filing. In fact, gathering information and statements from too many accounts at the time of filing I-T returns is a cumbersome job. “No need to say streamlining your finances into one or two accounts helps in this matter,” says Shetty.