The Buyt Desk
Do you have multiple bank accounts? Should you consolidate your funds and have a single account or continue with more than one bank account?It will depend upon how you use your bank account. Having multiple accounts has its own pros and cons.
In the current era of digital platforms and online transactions, everything seems easy. Even opening a savings bank account is easy as you can do it at the comfort of your home. You can fill an online application to open a bank account and opt for online (video) KYC and within minutes your bank account will be opened. This ease of opening new bank accounts has made people have multiple bank accounts. Some have for the heck of it and some assign each account to a specific purpose and some do it to have the best benefits of all. If the person is financially disciplined, then having multiple bank accounts can be beneficial. But maintaining all accounts and keeping track of each can be a task. Remembering username and pins of all cards of various banks can be cumbersome. Let us look into the pros and cons of having multiple bank accounts in detail.
Pros of having multiple bank accounts
Ease of ATM withdrawals – Most banks have capped the number of free ATM withdrawals every month and are charging beyond this limit. When having multiple accounts, you can enjoy free ATM withdrawals of all banks and not cross the capped limit especially if you are a frequent user of ATMs.
Security – There is security by a subsidiary of the Reserve Bank of India (RBI) known as the Deposit Insurance and Credit Guarantee Corporation. When the bank fails to pay, your amount upto Rs 5 lakh is insured by these corporations. If you are putting all your money in one bank which exceeds Rs 5 lakh, then if anything goes wrong, you will receive only Rs 5 lakh. By having multiple accounts you will save yourself from losing money by distributing the funds. Money in each bank will be covered by insurance.
Accounts for specific goals – Most allocate each bank account for a specific goal like the kid’s higher education, housing fund, travel fund, emergency fund and family everyday expenses. Having such a separate account will ease the task of saving and segregating.
Best features of multiple banks – Along with savings accounts, banks also offer other features like premium debit cards, insurance, lockers. Such privileges can be used by multiple banks like having multiple lockers. You can enjoy rewards and discounts given on credit/ debit cards on making utility payments and purchases. This way you can maximize savings though you are spending.
Banking partner privileges – Banks have a tie up with various e-commerce and online retail portals. These partners have exclusive offers to bank customers. When you have multiple accounts, you can enjoy offers and deals of various partners.
Cons of having multiple bank accounts
Tracking is difficult – Tracking multiple accounts and their debit cards, cheque books, usernames and passwords, AMB and credit payments is difficult and burdensome.
Maintaining monthly balance – Nowadays, all banks ask their customers to maintain average monthly balance (AMB) in their accounts. If you fail to do so, it will attract fine. When you have multiple accounts, you have to maintain AMB in all accounts. You will have to pay a penalty to all accounts that do not have AMB.
Account fees and charges – You have to pay annual fees, ATM charges, maintenance fees, locker fees and many more charges across the accounts.
Failing to get good interest – Each bank has different interest rates and one of your accounts will be having the highest rate. By parking your funds across accounts, you will lose the interest amount that you would have got from the highest interest rate account. So it is better to have all your money in one single highest interest yielding account.
Summing up
You can decide on having multiple accounts or not after considering your pattern of transactions, frequency of transactions, volume of transaction and risk factors. Lesser transactions do not need multiple accounts and avoid paying multiple fees and charges. It is better if you close all your non transactional accounts and put all your funds in one single highest interest yielding account.
