People often end up with multiple Savings Accounts either because they operate through them or they forget to close their old account. Old salary accounts, for example, are often left active even when not operational.
Closing such accounts can be financially beneficial and here’s why we say that.
Maintaining minimum balance can lead to unnecessary expenses
Most Savings Account requires you to maintain a minimum monthly balance or an average quarterly balance. The minimum balance ranges between Rs. 5,000 to Rs. 25,000 and on failing to maintain it, you could be charged penalties. Thus, the cost of maintaining the minimum balance on each account is an unnecessary burden if some of the accounts are not in use.
Even salary accounts, which are typically zero balance in nature, get automatically converted into Savings Account after three months of non-operation. These accounts then require you to maintain the minimum balance.
Smaller monthly charges can be financially draining
A majority of Savings Accounts come with associated charges including charges on Debit Card, SMS alerts, phone banking and ATM usage. These charges can add up to a substantial amount. By closing unwanted accounts, you can save up to a large extent.
Lose out on investment opportunities
If you have multiple Savings Account, you are foregoing an opportunity cost due to non-maintenance of minimum balance norm. The interest you earn on a regular Saving Account is around 4% per annum, which is much lower than the yield from PPF, Mutual Fund etc. You lose out on the opportunity to earn better returns.
Potential misuse of accounts
If you have too many bank accounts, keeping track of them becomes troublesome and time-consuming. As a result, these accounts are often unattended and exposed to security risks. If you are not using an account regularly then it’s best to close it.
Confusion in ITR filling
You may not be operating through your bank accounts but when it comes to filing ITR, you need to provide detailed information of all the accounts in your name. Multiple accounts would mean cumbersome paperwork. Minimising the number of Savings Bank accounts would make ITR calculations easy.
Closing unwanted bank accounts might seem like a small step towards maintaining good financial health but it goes a long way.
(The writer is CEO, BankBazaar.com)