Let’s discuss one of the most important questions asked by the individuals – Should I keep multiple bank accounts? The question might seem silly at first, but it may have a lasting impact on your finances. It would be wrong to give one fixed answer to this question as each individual has a different set of requirements as per his or her finances. Therefore, in this blog, we will discuss ‘Should you keep multiple bank accounts?’ and what are the pros and cons of keeping more than one bank account.
Why Do You End Up With Multiple Bank Accounts?
Generally, individuals don’t wish to keep multiple bank accounts and start with only one account. But they end up with more than one account due to reasons like job change but not closing the salary account, using a different account for Demat account, home loan, or due to a specific requirement of an account with a national bank.
If you are holding multiple accounts or plan to open more than one account, you should know the advantages and disadvantages of both to make the right decision.
What Are the Benefits of Having Multiple Bank Accounts?
Following are the benefits of having multiple bank accounts:
- You can easily track different types of transactions – You might be dealing with different types of transactions from savings accounts like pension accounts, Direct Benefit transfers from the government like LPG subsidy, and income tax payments and refunds, etc. Even though these transactions can be done from a single account, using multiple accounts will help you in tracking the transactions easily.
- You won’t be dependent on one bank anymore – In the current scenario, all the banks are completely dependent on the technology to allow you to access your money. If you face difficulty with one account, having multiple accounts will help you access the other one so that your work doesn’t get delayed.
- Cost-effective for individuals with high ATM usage – ATMs are the main source of withdrawing cash and most of the banks allow only a certain number of free ATM withdrawals each month. Once the limit is reached, the subsequent withdrawals will be charged. If your work demands you to withdraw cash regularly each month, then having multiple accounts will help you save money on ATM charges and you will be able to withdraw money from multiple accounts each time.
- Different accounts for Online or UPI transactions – More and more people are carrying out online and UPI-based transactions today. But, this has also increased the risk of online frauds and hacking. Due to this, many people open a new account for carrying out online/UPI-based transactions and keep a minimum fund in the account. This ensures that there will be limited losses in an event of a breach of password.
Also, Read – When Is the Right Time To Invest in Stocks?
What Are the Disadvantages of Having Multiple Accounts?
Along with advantages, there are many disadvantages to having multiple bank accounts. Some of them are:
- Maintaining Minimum/Average Balance in every account – Every bank account has a requirement of maintaining minimum balance to operation. The amount may be Rs. 1000 or less depending upon the bank. If you fail to keep the required amount, you may have to pay a non-maintenance charge.
- In-efficient use of your funds – As you are required to maintain a minimum balance in each of your bank accounts, your money will be blocked and cannot be put to some other use. Therefore, you won’t be able to use your funds optimally.
- Issues due to dormant accounts – If you don’t use your bank account for 2 years, the bank will change the status from ‘Active’ to ‘Dormant’ as per the guidelines of RBI. The service linked to your account will be stopped and you may have to face charges or penalties as per the respective bank. Also, dormant accounts may be used by criminals for carrying out illegal transactions.
- Monitoring and managing all accounts together – Using multiple bank accounts means having to go through all the account statements to make sure that all the transactions are in place. You will have to keep your contact details updated with all the bank accounts. This can be time-consuming for you which isn’t the case with using a single bank account.
Key Points To Remember
Should you keep multiple bank accounts? Using multiple bank accounts has its pros and cons.
- Pros are:
- Less dependency on one bank.
- You can easily track all types of transactions.
- It is cost-effective for individuals who use ATMs frequently.
- You can use a different account for online/UPI transactions or trading
- Cons are:
- In-efficient use of your funds.
- Need to maintain a minimum fund in each bank account.
- Need to manage or maintain all the bank accounts.
- There may be issues related to dormant accounts.
Summing Up
We hope you have found an appropriate answer to the question ‘Should you keep multiple bank accounts?’ It may be clear that having multiple bank accounts is a challenging task for an individual. Therefore, before you open another savings account, you must assess your financial situation carefully. If you are capable of managing multiple accounts without any financial constraint, then go ahead with it as multiple bank accounts offer certain benefits too
Frequently Asked Questions
- Should you have multiple bank accounts?
- Having multiple bank accounts provides benefits if your financial management strategy needs more than one bank account. The advantages are tracking different types of transactions with ease, not worrying about your tasks getting stalled if the one bank systems are not working, less cost of using an ATM, and safe and secure UPI transactions, etc. But there are many drawbacks of using multiple accounts too.
- How many bank accounts should you open?
- Usually, one bank account is sufficient for an individual. It provides better control and management of your finances and reduces the load of maintaining a minimum fund in the account. But, if your requirement demands more than one bank account, you should consider all the aspects carefully.
