Should You Hold Multiple Bank Accounts? Check Pros & Cons Here

Remember that any decision on holding multiple saving accounts should be taken based on your frequency and pattern of transactions, volumes, and risk-hedging needs

New Delhi: With the proliferation of digital banking services in the country, it has become easier for us to open savings accounts online or through mobile apps from the click of a button. You can apply for an account online, complete a video KYC, and open within a few minutes.

With this ease, it has become easier to open multiple savings accounts in different banks. If you want to hold multiple savings accounts then you should be aware of the advantages and disadvantages.

Here are benefits of multiple accounts:

Offers with accounts

Most banks offer multiple lockers, insurance, premium debit cards and other privileges. Apart from these, account holders also get rewards and discounts on utility payments, shopping, and EMIs. Therefore, holding multiple accounts can help to maximise savings at the time of spending.

Easy access

Banks have capped the number of free withdrawals from ATMs every month. However, having a multiple accounts can allow you to transact from many other ATMs thereby saving on the associated charges. This can help those who frequently use ATMs.

Helps in goal-specific accounts

There are some individuals who deposit money in different savings accounts keeping in minds financial goals such as travel, buying vehicle or higher education etc. Some prefer to have joint accounts for family members only for daily expenses while some chose to have a separate account as a contingency or emergency fund as well.

To take benefit of banking partner deals

It is to be noted that various online and e-commerce portals tie up with a bank for exclusive deals and offers. With multiple accounts in different banks, one can avail a wider range of such offers.

Security

Are you aware that 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? It means the amount held by account holders is covered if the bank fails to pay them.

Hence, keeping the 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.

Know certain limitations in holding multiple accounts

Average monthly balance target

All account holders need to maintain an average monthly balance (AMB) in each of their accounts. It is to be noted that in case don’t maintain the AMB, it will attract a penalty. There are chances that you can miss out on the AMB limit if you are managing multiple accounts.

Loss of interest amount

Since banks offer different interest rate on savings accounts, hence spreading the money in multiple savings accounts can lead to a loss of interest. Many banks provide higher interest if the deposited amount is above a certain threshold. It means if the money is deposited in multiple accounts, there are chances that you don’t match the threshold and end up losing on this interest.

Fees and charges

Most importantly, savings accounts come with certain annual fees and charges such as ATM charges, locker fees, and maintenance fees. Remember that paying these fees and charges for all accounts can take away the incentive of overall interest earned.

Hassle of tracking

More importantly it may become difficult for those who are not financially disciplined to track multiple cheque books, debit cards, net banking user IDs and passwords, and AMB.

Remember that any decision on holding multiple saving accounts should be taken based on your frequency and pattern of transactions, volumes, and risk-hedging needs. An additional savings account should be opened only if it matches one’s requirements and offers a relatively higher interest rate.