With the expansion of digital banking services in the nation, we can now create savings accounts online or through mobile applications with the touch of a button by following few simple steps. And you must have seen that the majority of banks provide savings accounts with distinctive features; as a result, many people create numerous savings accounts with various banks in order to take advantage of the benefits associated with each account.
However, before deciding how many bank accounts you should have, here is a list of advantages and disadvantages of having the same.
Benefits of having multiple bank accounts
The maximum withdrawal amount on a debit card are often restricted by banks. Therefore, if you have multiple bank accounts, you can use a different bank's debit card if one card's withdrawal cap is reached.
Offers and benefits
The majority of banks provide services that one may utilize, like numerous lockers, insurance, premium debit cards, and other benefits. Account holders also receive bonuses and savings on purchases, EMIs, and utility payments. Having numerous accounts will therefore allow you to maximize savings while spending.
Since banks limit the amount of free withdrawals from ATMs each month, having multiple accounts enables one to use numerous ATMs and avoid additional fees. This is especially advantageous for those who often use ATMs.
Fund security via FDs
You may invest in FDs with several banks as long as the total investment does not exceed 1 lakh. The Deposit Insurance and Credit Guarantee Corporation (DICGC), insures each depositor in a bank up to ₹1 lakh for the principle and interest against the closure or revocation of a bank's license. Therefore, you may safeguard the security of your cash by maintaining FDs with many institutions and having multiple bank accounts.
Drawbacks of having multiple bank accounts
Minimum balance requirement
Most types of bank accounts have minimum balance requirements that must be met in order to avoid penalties. Therefore, if you intend to open numerous bank accounts, you could need to maintain the minimum balance in each account in accordance with their rules, which would result in a sizeable sum overall being illiquid and inactive in such accounts.
The interest rate on savings accounts varies between banks. Compared to having all of your cash in one high-yield savings account, depositing money into various savings accounts might result in a loss of interest. If the amount deposited exceeds a predetermined limit, many banks provide greater interest rates. One account will not get this interest if funds are put in numerous ones and the threshold is not met.
Multiple bank account management might be difficult as well. You run the risk of often forgetting the login IDs and passwords if you use mobile or net banking for each account. In an effort to minimize confusion, individuals frequently make the error of writing down their login information, which raises the possibility that it may be stolen.
Multiple fees and charges
The majority of savings accounts include annual fees and charges, including those for ATMs, lockers, and maintenance. Paying these fees and charges on all accounts might reduce the amount of interest generated.
The choice to maintain numerous savings accounts should be based on the volume, risk-hedging requirements, and the frequency and pattern of transactions. Multiple savings accounts involve more work, but they may be an effective strategy to control spending and keep on track with financial objectives.