Do not hold more than two savings accounts

K. Aravind

Many people have more than enough bank accounts. It is common to open new bank accounts when changing jobs. Similarly, you may have to open new accounts when taking a home loan.

According to the World Bank’s Global Findex report, half of all bank account holders in India have at least one inactive account. This is the highest standard in the world. In developed countries, only 25 per cent have inactive accounts.

As the number of accounts increases, more money will have to be kept in the accounts. Most banks require you to maintain a minimum balance in your savings account. The minimum balance amount varies according to the banks and branches.

Interest rates on savings bank accounts range from 2.70 per cent to 4 per cent. Having to maintain a high minimum balance on accounts with such low interest rates can adversely affect investment. If this amount is deposited in a fixed deposit, the interest can be doubled. You can also invest in high return sources such as mutual funds.

Savings bank account holders are also required to pay fees such as debit card charges. This charge will be levied even if not used. All this leads to excessive costs.

Normal salary accounts do not have to maintain a minimum balance. At the same time, if the salary is not credited to the salary account for three consecutive months, it will become a normal savings account. In that case, if you do not maintain the minimum balance, you will have to pay a penalty.

If no transactions are made in an account for two or more years, it will be frozen. Or you will not be able to make any transaction by debit card, check or online banking. The account can be reactivated only after filling up an application at the bank branch. In the case of a joint account, this is possible only with the consent of all account holders.

If different accounts are linked for different transactions, it is natural to get confused about the transactions. Similarly, when filing an income tax return, you will be required to provide information on interest from various savings accounts. Also, handling various cards and check books can be a headache. Remembering the passwords for each account is also difficult.

The best way to avoid such headaches is to make sure that the number of savings accounts does not exceed two. For salary account holders, it is sufficient to maintain it. If you have to open a new salary account when switching to another company, be sure to close the old account. In addition to the salary account, there can also be an account. If it’s a joint account, you and your spouse can manage it.