How Many Bank Accounts Should You Ideally Have?

Living standards of people have gone up in recent years and most of the people possess more than one bank account in the same bank or the combination of banks. Many working people frequently open their accounts with various banks after changing the company they are working in.

In modern days, the spread of digital banking system has allowed people to open savings accounts online or through mobile apps of banks from the comfort of their homes.

One can apply online, complete a video KYC, and open an account in a matter of a few minutes. This ease of use has also allowed people to open multiple savings accounts in different banks.

Owning multiple savings accounts can be beneficial and hectic at the same time. While having multiple savings accounts may prove to be great for keeping track of your goals efficiently, it can be a cause of losing your money while it is in the bank.

Some banks practice converting a zero balance salary account into a savings account it there is no salary credited for a few months for which an individual has to maintain a minimum balance which is difficult when one has more than one account.

If there is no minimum balance in the account, then the account should be closed.

Likely Benefits Of Having More Than One Savings Account

Automated transfer of money from your primary account to other Saving Accounts reduces the chance of spending it impulsively.

Debit Cards linked to some savings accounts have a per-day limit on fund withdrawal. So, having multiple accounts comes in handy whenever there comes urgent need of cash. 

Account-holders get rewards and discounts on making utility payments, shopping, and EMIs. Hence, holding multiple accounts can help you maximise savings while spending.

Ease of Access

Multiple accounts allow users to save on the charges levied on multiple transactions by the banks. If an individual holds multiple savings accounts then it will be easy to withdraw money from various ATMs using multiple cards.

Goal-Specific Accounts

Many people prefer multiple accounts to meet their goals such as personal savings, travel, vehicle purchase and higher education. Some open joint accounts for family members just for daily expenses. Many keep a separate account as a contingency or emergency fund as well.

It helps you build momentum for your financial goals, monitor progress and hold yourself accountable while saving for the future.

Here’s How You Can Allocate Your Money Across Different Savings Accounts: 

Main Account: You can have one main account which will act as your primary account for major monthly expenditure. This account can be linked to all your EMI payments, rent, mutual fund investments, monthly shopping and other automated bill payments. 

Salary Account: You can have a separate account to receive your monthly salary. This can also be a temporary account which you can consider closing when you change your job. You can regularly transfer a certain amount from this account to your main account to meet investments and expenses. 

Joint Account: Having a joint account between spouses formulates comprehensive knowledge about financial assets. You can use this account as an avenue for 3-6 months worth of contingency funds. The nominee of such an account can be your children. 

Banking Partner Privileges

When having multiple accounts in different banks, one can take benefits of wider range of offers and discount as various online and e-commerce platforms tie up with a bank to tap on huge market and provide consumers with exclusive deals and offers.

Security

An amount up to Rs 5 lakh in a scheduled bank is insured by the Deposit Insurance and Credit Guarantee Corporation, a subsidiary of the Reserve Bank of India. The corporation covers the amount held by account holders when a bank fails to pay them.

Placing all funds in one bank can be risky if the amount exceeds Rs 5 lakh. Depositing the funds in different banks will ensure that each of them is separately covered by insurance. Such accounts can be used as a backup in case of a default by the bank where one has the primary account.

However, there are certain limitations in holding multiple accounts in banks.

While there’s no limit to how many savings accounts you can have, there are a few things to consider before signing up for more than one.

According to financial experts, it isn’t advisable to open more than three savings accounts, as it can be difficult to manage. Apart from having a minimum balance in each account, banks might also mark an account dormant if there is no activity for a period of time. Additionally, banks levy various charges on these accounts, and if you’re keeping them idle, the balance will decrease unnecessarily. 

Average Monthly Balance (AMB) Requirement

Account-holders need to maintain an Average Monthly Balance (AMB) in each of their accounts and failing to do so attract a penalty. It’s easy to miss out on maintaining the AMB while managing multiple accounts.

Loss Of Interest Amount

Not all banks provide the same interest rate on savings accounts. Depositing money in multiple savings accounts can lead to a loss of interest compared to having all funds in a single, high-yielding savings account. Many banks provide higher interest if the deposited amount is above a certain threshold. If money is deposited in multiple accounts and the threshold is missed, one will lose out on this interest.

Fees and Charges

Most savings accounts come with certain annual fees and charges such as ATM charges, locker fees, and maintenance fees. Paying these fees and charges for all accounts can eat into the overall interest earned.

Hassle of Tracking

For those who are not financially disciplined, keeping track of multiple chequebooks, debit cards, net banking user IDs and passwords, and AMB can be difficult.

A decision on holding multiple saving accounts should depend on the frequency and pattern of transactions, volumes, and risk-hedging needs. Multiple accounts may not be needed if financial transactions are restricted to one or two a week. It may be prudent to close idle savings accounts or those with poor features to avoid costs such as annual card charges and the opportunity cost of maintaining AMB.