Have you ever wondered how many savings or bank accounts you should have ? This seems to be the most innocuous little botheration for anyone but it could become one of the most basic and important factors to streamline your finances in your financial planning.
As you move across your career through different companies, you might end up with multiple salary accounts with different banks. However, only one of them will end up being your salary account (where your salary is credited every month).
The previous ones will become an ordinary savings account.
Managing so many accounts is a cumbersome task. Let us check how many bank accounts you really need.
How many savings accounts ?
Good personal finance advises that one could suffice all his banking needs with just two bank accounts. Of these two, one is your current salary account and the other is a permanent account from where all your loans and investments are transacted.
Your salary account is permanent till the time you are with your current employer. If you move on and your new employer can use this same salary account, nothing like it, however, if you are required to open an account with a new bank, then your previous salary account can be termed temporary as you are now no longer going to use it actively.
Once you stop using your previous account actively, it begins to become a liability. This is how an individual accumulates many accounts over a period of time.
Let’s talk about the permanent account now. There could be loans that a person has for which EMIs (Equated Monthly Installments) are debited each month or there could be monthly regular investments in mutual funds (Systematic Investment Plans) that are in force – all these need to be linked to your active and permanent account.
So when you move onto a new job, your permanent account will always be active – so your loans and investments will still in force. Use
this permanent account for all refunds and debits that you might have to do. Obviously, you need to replenish this account from your salary account each month.
I learnt this the hard way when an Income Tax refund cheque came to me a year later from the tax department (yeah, they still are that fast in this part of the world !) and I realized that the account number mentioned on the cheque was that of a temporary salary account that was now long closed.
Another important point to keep in mind is that your permanent account should possibly be equipped with net banking and mobile banking along with the plethora of features of core banking so that it provides maximum flexibility to you.
Its important that you do not change the permanent bank account from time to time – that will call for bouncing cheques and default on EMIs.
Why not many accounts ?
The disadvantage with many accounts is that at some point in time after you stop using it as your salary account they lose their privileged status and a minimum balance is required either monthly or quarterly to keep them active.
For example, ICICI Bank’s Regular Savings Account charges, for non maintenance of minimum quarterly average balance is Rs 750/- per quarter. The minimum quarterly average balance for Metro and Urban is Rs.10,000 and for Semi-urban and Rural is Rs.5,000. So as and when your privileged salary account gets converted into a normal account and you forget to keep the minimum balance, you are charged this amount.
So make sure that you close down your account that are lying there serving no purpose. Less accounts mean less statements to read per month and less paperwork.
Remember
When to open another account ?
There might be instances when you cannot help but open a new account.
Open a new account if :
- If you have a business and want to track its finances separately.
- You want to open a separate savings account with your child and monitor his progress on spend (which, in spite of your monitoring, is going to sky rocket).
- Your spouse says “Don’t peep into my finances !”. No choice, here, eh ?. Open a separate account.
Radhey,
Excellent post, wonder why no comments.
I have over 5 accounts.
Rakesh
@Rakesh, Thanks for starting it Rakesh. I am consolidating all my account this year and bringing them down.
I have 14 Savings bank account.
3 with HDFC bank (including 1 salary account)
2 ICICI
1 Citibank
3 SBI
1 Kotak
1 Yes Bank
1 Indus Ind
1 Ing Vysya
1 Canara Bank
Every month I use 1 account as the Main spending account.
@Deepak, 14 ? Why so many ? Is there a real need for them ?
@Radhey Sharma, Please see my reply, to a similar query, below.
@Deepak, Wow man! how do you manage all these accounts? Is there any benefit in having so many of them?
@Vivek K, No benefit at all, only headaches. I am too lazy to close them but now I have made up my mind to bring them down to 4 by the end of this year.
But its not that I enjoy having so many accounts. I have always had a strong reason for opening each one of them. Instead of transferring some of them I should have closed them but they had sentimental values.
One of them was opened when I was studying and lived in a hostel, one for a locker, 2 ex-salary accounts should have been closed instead of converting them to ordinary accounts but at that time they seemed important. One was opened along with a home loan and one along with a personal loan. The salary account with HDFC gets closed when salary credit stops so they made me open another zero balance account to link my Demat account. Later I fell for the auto sweep facility of their SavingsMax account and opened that one too. The only positive part is if I want to save some amount every month for a long term big ticket purchase I never have to worry about where to hide that money away. 🙂
@Deepak, Good one Deepak, you seem to have enjoyed the best of all the banks 😉
@Deepak, Since you have dealt with so many banks, who do you think is the best in the lot? Keep below points in mind while replying: –
1) Customer oriented products. e.g. HDFC would fall behind in my eyes because they charge for making a TPP via net banking.
2) Good and prompt service while dealing with customer issues/complaints. e.g. ICICI would fall behind in my eyes because customer has to follow-up numerous times to get a resolution.
Which bank has the best combo in your experience?
@Deepak,
Wow, i thought i only had many accounts. How do you remember so many netbanking credentials.
I got only 4 but operate mostly with the first two: –
1) My salary account
2) Joint account with wife
3) Savings account dad opened when I was minor
4) Savings account I was forced to open to take home loan
Third is still managed by my dad 🙂
Fourth I use only as last resort.
@Vivek K,
Do they do that – “Savings account I was forced to open to take home loan”. How cheeky of them !
Yes Radhey, I was asked by SBI to do that. Actually the way their systems works is they identify customer by giving them unique ids and those ids are given only with savings account. This is the only way you can access you home loan account online.
So, they are offering benefit to the customer and also to themselves – “behti ganga mein haath dhona” 😉
SBI asks everyone to open a new account. Even when i approached them to open a PPF A/c, they mentioned that we need to open a savings account first and then they will open a PPF A/c. Though there is no rule mentioned anywhere, i did not argue much and opened the same.
Not sure whey they do this?
@Rakesh, It is to provide unique id to every customer in their system.
@Vivek,
Agree but why they ask to open a savings account for PPF, both are two different entities. We don’t need to open any account for PPF when done with the post-office. This way they are generating more money. Every customer who opens an account will have to keep minimum balance.
This rule was not there 2-3 years back when one approached them for PPF.
@Rakesh, Smart business strategy I’d say. They have designed the system in such a way that people can’t get away without opening a savings account. They know their products are competitive and customers will come to them and they are encashing on it. But the good part is the minimum balance to be maintained is as low as Rs 1000, so customers don’t really mind.
@Vivek,
Yes, the minimum balance with SBI is only Rs. 1000 unlike ICICI bank where its Rs. 10000.
But when my colleague threatened then that he would approach Banking Ombudsman they promptly opened the PPF A/c with opening Savings A/c.
Sorry my last comment should have read –
promptly opened the PPF A/c without opening Savings A/c.
Hey Gyez.
Plz. Tell Me that what is the limits of saving bank accounts for a single person…..??????
plz. plz. plz. plz. plz. plz.
you can mail your answer on dheeraj.w78@gmail.com
@Dheeraj,
There is no limit to number of accounts but with PAN becoming mandatory the IT department can easily track the number of accounts. Be cautious.
Hi,
I have a salary account in Axis bank with my previous employer, as it was not used after 3 years now its in dormant state showing a negative balance of Rs. 750/- . Now my new employer wants to create a salary account with the same bank. So if i create new account will they charge that negative balance/ or any hidden charges of old account into my new account???
If anyone of you have any idea please answer??
Thanks in Advance
Prasad S
No, they will not charge the amount from the new bank account. Also approach the bank and request them to close the previous account. The balance (negative) will not increase now as RBI has directed banks not to charge accounts non-maintenance charges once balance goes below zero. But you should close it if you don’t need it.
Hi,
I have a salary account in Axis bank with my previous employer, as it was not used after 3 years now its in dormant state showing a negative balance of Rs. 750/- . Now my new employer wants to create a salary account with the same axis bank but in different branch. So if i create new account will they charge that negative balance/ or any hidden charges of old account into my new account???
If anyone of you have any idea please answer??
Thanks in Advance
Prasad S