Adhil Shetty
People often have multiple bank accounts for various reasons. It could be because they manage their money through multiple accounts, or have simply forgotten to close old, non-operational accounts. It’s common for people to have one salary account for every job they’ve held, or one account in every city they’ve lived in. Often these accounts are not closed after they’ve served their purpose.
Unused and idle accounts must be closed for better financial health. Let's look at some reasons why you should do this.
Maintaining minimum balance in each account
Once you have left a job and joined a new one, the new company opens a salary account for you. The old zero-balance salary account then gets converted into a regular savings account after three to six months. And most savings bank account need you to maintain a minimum balance which can range between Rs. 5,000 and Rs. 20,000, depending on where you live or what kind of an account you have. On failing to maintain the minimum balance, you would be charged penalty. This is an unnecessary expense, considering the account is unused and unwanted. The best practice is to close any unused account right away to avoid penalties.
Losing out on Interest
If you have multiple unused accounts and you maintain the minimum balance in each of them, you are paying an opportunity cost. Deposits in a savings account typically earn 4 percent to 6 percent as rate of interest per annum. You may be better served putting your surplus funds in fixed or recurring deposits, mutual funds, PPF, etc to earn higher returns.
Confusion in filing ITR
Too many bank accounts will only make your ITR filing cumbersome. You will have to collect information and statements from each of the bank and go through them at the time of filing for tax returns. It’s easy to miss out an account or report earnings incorrectly with so several accounts to maintain. Make your ITR process easier by minimising the number of accounts.
Paying unnecessary charges
Most accounts come with associated charges such as annual charges for holding debit card, fees for other services such as SMS alert. You don’t want to waste your hard-earned money in paying such charges for unused bank accounts. Failing to pay these charges on time can attract penalties. The more accounts you have, the more you would be paying towards this assortment of services.
Misuse likely
If your accounts remain unused and unattended for a long time, they might attract unwanted attention, especially if there is a large balance in them. You don’t want any fraudsters and scammers trying to find ways to fish this money out of your account while you’re looking away. If you are not using any accounts in regular interval, it’s best to close them.
(The writer is CEO of BankBazaar.com)
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