Today’s article is very much basic article, but after reading complete article you will understand how many (in some case it’s “Much” – are you falling in this category ? 🙂 ) Saving bank accounts you need.
Recently I had a conversation with my friend Mr. Alkesh Patel, who shared his tragic story. It’s really worth to understand how he faced financial trouble. I am sure this real incident will help you to understand how many saving bank accounts you need. After reading this article you will definitely follow the steps as mentioned.
Coming back to the story, Alkesh was booking mobile phone for his soul mate during promotional discount seal on one of the famous e Commerce sites and he was eligible for very good discounts if he orders using his Visa debit card, but unfortunately he had to postpone his purchase.
When I asked him regarding the issue, he faced. He replied, “I do not have enough money in my bank account”. I knew him from last 8 years, so I was curious to know is he facing any financial crunch in his life. So I asked him how much is the current balance in his account?. He answered “currently I am having around Rs. 1, 50, 000″.
Immediately I asked, what was the issue for not buying a mobile phone? He replied very coldly “none of my account having money more than Rs. 35, 400 at that time to order mobile phone from an online website. I became a little bit confused after hearing so again, I asked him, how many saving bank accounts you hold? And the answer was six saving bank accounts. I questioned for what purpose he opened this many accounts?
My Father opened my first saving bank account in State Bank of India when I was in college during the year 2005.
- BalanceRs. 21,237.
- Inactive Account, last used in 2013.
When I joined my first job after completion of my engineering in the year of 2007, my employer opened a salary account in ICICI Bank.
- BalanceRs.29, 000.
- Now, Investment Account to manage all the investment and dividend income.
During the year 2009,Central bank of India held campus promotion in my organization offering zero balance account. I opened one more account considering benefit of zero balance account.
- BalanceRs.23, 029.
- Household Expenditures are managed from this account.
In the year 2012, I applied for a credit card with ICICI Bank but application got rejected saying my city doesn’t fall under service area. I applied in HDFC Bank for a credit card and the sales person offered me a credit card with a zero balance saving account so I opened one more account.
- BalanceRs. 27,010 (Credit card payment was pending)
- Online Shopping Account.
After Interest rate deregulation on bank deposit, I opened an account with Yes Bank to earn more on my savings.
- BalanceRs. 28, 500.
- Personal Expense account.
In Year 2015, I changed my job and moved to the new organization. This organization has an exclusive tie-up with IDBI bank for salary account.
- BalanceRs. 21, 698.
- Salary Account
In total, I was holding around Rs. 1, 50, 000 bank balance during online sell on an eCommerce site, but none of my accounts came to my rescue. Secondly, my credit card limit is Rs. 65,000. But I have already used Rs. 27, 000 to pay my health insurance premium. So if I use a credit card then I will miss 10% cash back offer (the offer was with debit card payment) and I have to bear high charges on my credit card due to over usage (Over usage charge of Min. 500 Rs with my HDFC Credit Card). So finally i gave up my purchase and transferred all the money in Investment account.
What was he losing because of these multiple bank accounts?
Apart from he has to manage multiple debit cards, Internet banking Id, login password, transaction password and check books etc. He require to update his Address, or mobile number in case of change in address or Mobile number, tracking of statements to classify transactions to manage own budget, Maintenance of AQB etc.
- Service cost: Major disadvantage, especially when banks have started charging fees for most of the services. For example, if you have six Savings Accounts and each charge Rs 100 plus tax annually for the debit card, then Rs 750 is the cost of debit card service.
- Average Quarterly Balance (AQB): For private banks, AQB requirement is Rs 5000 or Rs 10000 and for PSU Banks, its Rs 1000. This also depends on service areas like Rural / Urban or semi-urban. So he had to spare around Rs. 30, 000 on a regular basis to avoid any non-maintenance charges which are ranging from Rs 300-750 in his case. Recently banks have increased charges for non-maintenance of AQB w.e.f 1st April 2015.
- Losing out on interest income: Once your salary account reverts to a standard savings account on account of no salary credits, you will usually get 4% interest at most.
For example; if you are holding six saving bank accounts with a minimum balance requirement of Rs. 5,000 each(Rs. 10,000 for urban city). Each account earns 4% per annum. You will get roughly Rs. 200 per account each year if you don’t add any money to it. That is Rs. 800 (Rs. 1600 if you are living in urban city) total interest earned across six savings accounts. (Considering two zero balance account)
Now if you close Three accounts and put that money in Yes Bank (in his case) you will earn 50% more interest (6%) or if you invest in Liquid Fund, earning will be around 8% which is 100% more than what you are currently earning on your saving account.
How many saving accounts do you require?
There is no clear thumb rule how many accounts, one should hold, but it purely depends on your job or business. One should have maximum 2-3 accounts.
- Salary account / Business Account
- Most of us do not have a choice to choose the salary account.
- Ensure you close this account once you shift your job.
- Do not take any kind benefits offered by the bank or the government like “Pradhan Mantri Suraksha Bima Yojana” (accident insurance), ” Pradhan Mantri Jeevan Jyoti Yojana” (life insurance) and “Atal Pension Yojana”
- Investment Account
- Link to your Demat account, Mutual Fund SIP, Home loan, Car loan etc.
- Keep watch on your passbook / statement.
Keep one account as a permanent account like your PAN number (you can’t change PAN number once it is issued in your name).
It helps you to keep watch on your spending, investment, interest income and Dividend income.
It helps to keep watch on regular EMIs, any government scheme benefits like subsidy on cooking gas, Monthly pension etc.
Remember some basic banking rules and tips
- Activate Mobile and Internet banking, it allows you to bank anytime, anywhere through your mobile phone, tablet, laptop or PC. You can access your banking information and make transactions on your Savings Account.
- Activate Mobile Banking Alerts, it allows you to receive regular and instant updates on your mobile phone through SMS sent directly from the bank. These alerts will be sent to you whenever an event occurs on the alert type you have opted.
- Ensure Nomination, There can be only one Nominee for a deposit account whether held singly or jointly. You can change the nominee(s) by making a declaration to that effect, in the appropriate form, which is available at any of the Bank branches, even some banks are providing this facility on internet banking platform.
- Update PAN number and Aadhar number. PAN is required for transaction greater than Rs.50, 000.
- Subscribe for e-statement. This will help us to save our environment and e-statements are handy in case you require, record keeping will be easy.
- Keep phone banking number saved on your mobile
- Always update your mobile number, email id and address as soon you change any of this.
- Do not share or write your ATM password or internet banking details like login id and password.
- Remember bank will never ask your address or debit / credit card number. Do not share these numbers with any unknown caller or visitor without authenticating his identity.
- The account becomes dormant if there is no customer initiated transactions in the account for a continuous period of two years. If the account status is ‘Dormant’, transactions through Direct Banking Channels like ATM, Net Banking, Phone Banking are not be allowed by the Bank. To activate your account, first Approach the branch in person and submit a written request for activation of your dormant account, signed as per the operating instructions in the account. Bank manager may ask you to furnish proof of identity and Address (carry the original for verification).