Should You Have Multiple Bank Accounts?

31 July 2023
4 min read
Should You Have Multiple Bank Accounts?
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Today, we are going to talk about a unique question faced by many individuals – How many bank accounts should I have?

While the question might seem rudimentary at first, it can have a lasting impact on your finances.

There is no simple answer to this question since each individual’s finances are different and have different requirements. Hence, in this article, we will talk about the pros and cons of having multiple bank accounts and leave the decision to you.

How Do You End Up With Multiple Bank Accounts?

Many people don’t plan to have multiple bank accounts. However, they end up with them due to reasons like changing jobs but not shutting the salary accounts, opening a separate account for a Demat account, home loan, or specific requirement of an account with a nationalized bank.

Whether you are planning to open multiple bank accounts or find yourself holding many accounts, here are the pros and cons that you need to know to make the right decision.

Benefits Of Having Multiple Bank Accounts

Here are some benefits of having multiple bank accounts:

1. Easy Tracking Of Different Types Of Transactions

An individual can have different types of transactions from the savings account like Direct Benefit Transfer from the government (LPG subsidy, etc.), income tax payment and refunds, pension account, etc.

While all these transactions can be done from a single account, having a separate account helps in easy tracking of the transactions.

2. Reduced Dependency On One Bank

In today’s times, banks rely heavily on technology to allow access to your money.

If you have multiple accounts and face a problem with accessing one account, you can always transact using other accounts. This ensures that your work doesn’t get stalled.

3. Cost-Efficient For People With High-ATM-Usage

ATMs are the primary means of cash withdrawals today.

Most banks allow a fixed number of free ATM withdrawals every month. All subsequent withdrawals are charged. If you need to withdraw money regularly every month, then having multiple accounts can help you reduce ATM charges as you can withdraw from multiple accounts (different debit cards).

4. Separate Account For Online And/Or UPI Transactions

Over the last few years, online and UPI-based transactions have increased. However, this has also opened a new option for criminals to commit fraud and gain unauthorized access to your account.

Many people open a new account for online/UPI transactions and keep limited funds in the account. This helps limit the losses in the event of a breach of password.

Disadvantages of Having Multiple Bank Accounts

Here are some disadvantages of having multiple bank accounts:

1. Maintaining The Average/Minimum Balance In Each Account

Every bank account comes with a requirement to maintain a minimum balance in the account. This requirement can be a figure (like a minimum of Rs.1000 at all times in the account) or an average requirement across a quarter. Failure to do so usually results in a non-maintenance charge.

If you have multiple accounts, you will have to ensure that this minimum/average balance requirement meets all accounts.

2. In-Efficient Use Of Your Funds

Since you have to maintain a minimum balance in each account, your money will be blocked for the same. Hence, you will not be able to use your funds optimally.

3. Problems Relating To The Dormancy Of Accounts

If you don’t use an account for more than two years, then as per the guidelines by RBI, the bank has to change the status of your account from ‘Active’ to ‘Dormant’.

This means any service linked to this account will be stopped, and you might have to bear penalties or charges as levied by the bank. Further, dormant accounts are breeding grounds for criminals who use such accounts to make illegal transactions.

4. Managing and monitoring all accounts

Having multiple accounts means having to go through multiple account statements to ensure that all transactions are in order, keeping your contact information updated with all banks where you hold an account, and using the services offered by the account optimally. This can be time-consuming.

Key Takeaways

Having multiple bank accounts has certain pros and cons-

  • Pros include: 

        • Easy tracking of different types of transactions
        • Reduced dependency on one bank
        • Cost-efficient for people with high-ATM-usage
        • A separate account for online and/or UPI transactions
  • Cons include: 

      • Maintaining the average/minimum balance in each account
      • In-efficient use of your funds
      • Problems relating to the dormancy of accounts
      • Managing and monitoring all accounts

Summing Up

As you can see, having multiple bank accounts poses a lot of challenges to you. Hence, before opening another savings account, ensure that you assess your financial situation carefully.

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.

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