With individuals changing jobs often and banks making it easy for them to open a salary account, an individual today might have a number of Bank Accounts. Is this a good trend? Not exactly.
You must understand that the more the bank accounts you hold, the more money you will have to keep in those accounts. Most banks require you to keep a minimum balance and non-maintenance of the balance could attract a penalty. The minimum balance requirement ranges between Rs. 3,000- Rs. 10,000, depending on the bank with which you hold the account. This means if you have four savings accounts, then you would have to keep at least Rs. 20,000-40,000 in those accounts. So, your money cannot be used.
Apart from this, your money will earn minimal interest and you might have to pay charges for the accounts. Most banks now offer only 3%-4% interest on a savings account. Instead of keeping your money in the savings account, if you invest in fixed deposits, you will get 7%-8% interest. Also, savings accounts come with charges for debit card usage.
Another important point is that your salary accounts will be made savings accounts by banks if there are no salary credits. For instance, if you open a salary account and change jobs, your salary account will be a savings account if there are no salary credits for two or three months. After your salary account becomes a savings account, banks will require you to maintain a minimum balance for the account.
The most important point is that if your savings account remains inactive for two or more years, the account will be considered as a dormant account. You can’t make transactions using the account. This includes all transactions like deposits or withdrawals using your debit card, cheques, net or mobile banking. You will have to reactivate the account by submitting a written application if you want to use the account. If it’s a joint account that you want to activate, all the account holders will have to give their consent.
Want more reasons? Another reason you shouldn’t have too many bank accounts is the taxation aspect. Tracking your deposits and other transactions for tax purposes will be difficult. You will need to note down the Tax Deducted at Source (TDS) and other details for the accounts as you will need them while filing taxes. Another point is that you will have to remember the password for all the accounts and keep the debit cards for the accounts safely.If you are using all the savings accounts for withdrawals, you will need to keep track of the account balances so that the minimum balance is maintained.
What should you do?
It is good to have 3 or 4 savings account. One of them could your salary account, one could be a permanent account which you will use for loan Equated Monthly Instalments (EMI), your deposits and other investments and one joint account (with your parents or spouse) which you can use for contingencies. Of course, your spouse can have their own salary account.
Since your salary could change every time you change your job, it is good to close the old salary account when you open a new salary account. However, before closing the old accounts, make sure that there are no charges and all the auto-debits and National Automated Clearing House (NACH) mandates are de-linked.
If the account you want to close is linked to any of the payment platforms or service apps like Google Pay, Paytm, Swiggy or Zomato, or investment portals like MoneySage, you will need to de-link all of them. You need to be careful about UPI payments too. UPI payments are based on the bank account that is linked to your phone number. So, before you close your account, ensure that the bank account is not linked to any of the bank UPI payment apps. Provide another bank account number so that auto-debits for your EMIs or investments are not disturbed. Some apps may ask you to fill a form for de-linking.
Want to know how to close bank accounts? Here’s what you should do. All banks offer an account closure form. You need to get this from the bank’s branch or website. If it’s a joint account, then all account holders will have to give their consent by signing the closure form. Want to funds transferred to another account? You will need to fill a separate form mentioning the account number to which the balance funds need to be transferred.
You may need to submit documents for account closure. Typically, banks ask you to give back your unused cheque books, debit and credit cards, passbook and any other documents issued by the bank when you opened the account. You will have to surrender the documents with the account closure form. However, there are banks that ask you to destroy the documents without the need to submit them.
Also read: How Safe Is Your Bank Fixed Deposit?
Note that most banks levy account closure fees, especially if you close the account within a year from opening. For instance, State Bank of India does not levy an account closing fee if you close the account within 14 days of opening it. However, from day 15 up to a year, you will need to pay account closure charges of Rs. 500 plus GST. Held the account for more than a year? Then, you don’t need to pay any account closure fees. Though regulated by the Reserve Bank of India, there are no rules as to account closure charges. Each bank is free to charge any fees that they think is right. So, some banks may charge a slightly higher account closure fee when compared to others while some might completely waive off the charges if you have another account with them.
Once you submit all the forms and documents to the bank, the bank will check for any pending charges that might be associated with the account. If there are no charges, the account will be closed. Once the account is closed, ask the bank for an acknowledgment for the account closure. Along with the acknowledgment, keep the last account statement with you so that you can show that there have been no transactions in the account.
That is why if you have a permanent account, it will help. Ensure that you use this account only for loan debits, auto-debits, deposits, mutual funds and other investments. Since you will make many transactions using this account, you can compare across banks to choose an account with lower charges.
So, keep your savings accounts to the minimum so that you know where your money is and you can keep track of your expenses and investments.