How Many Savings Bank Accounts Should You Have?

Many people have only one Savings Bank account that fulfils all their requirements, whereas others hold multiple accounts to meet different requirements. However, many people do not have a clear idea about how many Savings Accounts should they hold. If you too are amongst them, read this article to know how many Savings Bank Accounts should you have.

Before going any further, lets first understand the benefits of having a Savings Account:

1. A Savings Bank Account is a multi-purpose account that can be used to keep your extra cash aside, day-to-day transactions, savings for a specific purpose like a family holiday and emergency fund, pay utility bills, manage SIPs and other investments, pay EMIs, etc.

2. Unlike other bank accounts, Savings Account has minimum requirements and restrictions on opening the account.

3. The interest rate offered on the savings accounts differs from bank to bank but is generally in the range of 3% p.a. to 4% p.a.

4. It can be opened and used by a person/persons or entity/entities for different requirements.

5. You can choose a type of savings bank account as per your requirements, such as a minor account for a kid, a HUF account for a HUF, a joint account with a spouse, premium savings account to get a premium debit and credit card, etc.

6. It comes with an affordable minimum balance requirement. Many public sector banks offer Savings Accounts with zero minimum balance requirement.

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What are the benefits of having multiple Savings Bank Accounts?

With the facility to open online savings accounts instantly, it has become easier to open multiple savings accounts. You can open multiple savings bank accounts either in the same bank or in different banks. Here are some key benefits of having multiple Savings Bank Accounts:

1. Easy Goal Tracking:

Keeping separate savings accounts for different goals makes it easier to track the goal progress. You can open a new savings bank account for your dream holiday that you have been planning for years but couldn't save enough for it or for your sibling's wedding that you have to contribute for. Keeping a separate account for such goals will ensure the money is not used for any other purpose, and it becomes easy to track the progress by simply checking the account balance.

2. Helps Control Misspending:

If you keep a separate Savings Bank Account to deposit excess cash or emergency fund, you are less likely to spend it on unnecessary purchases. To ensure the money stays untouched until it is absolutely necessary, it is advisable to disable the internet banking and debit card of that particular bank account. When the internet banking and debit card are active, you know you have easy access to those funds and you may end up spending it on something that is not on your preferred list. In case of an emergency or to meet the goal of opening a savings account, you can use the funds through a cheque or by visiting the nearest branch to withdraw cash.

3. Earn Maximum Rewards:

Every bank offers some or the other discounts and benefits on their debit cards, internet banking, credit cards, and mobile banking spendings. Banks usually have tie-ups with the merchants for discounts and offers. Having multiple savings bank accounts can help you get the most of these offers as you can select the bank account for payment that offers maximum benefit.

4. Easily Manage Funds with Standing Instructions:

The banks offer an auto-transfer facility under which you can set a specific amount to transfer to any other bank account periodically. For example, you can give a standing instruction to transfer a specific amount for emergency funds into another savings account every month on a specific date. It can also be used to transfer rent every month. The money will be automatically debited from your savings account and transferred to another account without any additional authentication from you. The Standing Instruction can be given for accounts within the same bank or other banks.

5. Keeps Maximum Funds Insured:

Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly-owned subsidiary of the Reserve Bank of India. It provides deposit insurance to the bank deposit holders if the bank fails to repay them. It insures all kinds of deposit accounts, such as savings accounts, current accounts, fixed deposits, and recurring deposits up to a limit of Rs 5 Lakh per account holder per bank. If an individual's deposit amount exceeds Rs 5 Lakh in a single bank, only Rs 5 Lakh, including the principal and interest, will be paid by DICGC. Hence, keeping the funds with different banks ensures that the maximum funds are insured.

6. The choice to Access Other Accounts:

It is possible that your primary bank's internet banking is not working due to the scheduled maintenance or your debit card is facing some issues, or you are unable to access your primary bank account due to any reason. Since we all are dependent on these instant payment methods, not being able to access the bank account at the right time can be inconvenient. In such a case, having a backup savings bank account makes sense. You can access your secondary savings account and get the job done without any inconvenience.

What are the drawbacks of having multiple Savings Bank Accounts?

1. Minimum Balance Requirement:

The Average Minimum Balance required in any bank is the average of all the closing balances you should have in a month. Different banks have different balance requirements in their Savings Accounts. Most public sector banks have nil to Rs 2,000 minimum average balance requirement, whereas it is Rs 5,000 to Rs 10,000 in leading private sector banks, depending on the location and bank policy. Keeping the minimum balance with all the banks might become unaffordable, especially if you have too many bank accounts in private sector banks.

2. May Lose Interest:

Nowadays, many banks offer higher interest rates on savings accounts with higher bank balances. By keeping the maximum balance in a single savings account, you can earn as much as 6% p.a. interest rate. However, by keeping multiple bank accounts you spread your funds across the banks, which ultimately does not let you hold the maximum balance in one savings account that can provide you higher interest rate.

3. Keeping Track of Multiple Accounts Can Be Challenging:

Managing and keeping track of too many savings bank accounts can be a challenging task. You have to ensure all the accounts have a minimum balance, they remain active with frequent transactions, they are KYC competent, etc. A simple change of mobile number or address can become a huge task as you will have to get it updated in all your bank accounts.

4. Inactive Accounts:

The banks will mark your Savings Account as inactive or dormant if you do not use it for a longer period of time and it has only interest credits. Even if you open a Savings Bank Account for a specific goal, you will need to transact in it once in a while to ensure the account remains active. To active the inactive account, you are required to submit your updated KYC documents to the bank.

5. May Lose Other Benefits:

If you maintain a high balance, the banks may convert your normal Savings Account to a premium savings account with your consent. Such premium accounts offer additional services, such as a Relationship Manager, door-step banking, access to premium debit cards and credit cards, discounts in locker fees, etc. The Average Minimum Balance in the premium savings account can be anywhere from Rs 25,000 to Rs 10,00,000 or even more.

How many Savings Bank Accounts should you have?

While there is no limit on how many Savings Bank Accounts you can open, it would help if you consider the above-mentioned pros and cons of having multiple savings accounts. Most financial experts do not recommend keeping too many savings accounts as it can be difficult to manage. Apart from the minimum balance requirement, you also have to keep the accounts active to avoid any inconvenience at the time of withdrawing the funds. Besides, the banks levy various charges like non-maintenance of minimum balance, debit card fees, statement charges, etc. It does not make sense to pay so many charges if you are not using these facilities.

However, having multiple savings accounts can help you control your splurging and manage other requirements. Multiple accounts not only help you save sincerely but also help you prioritise your goals. If you are planning to open another Savings Account, click here to know the things to consider before opening a Savings Bank Account.

Having two or maximum of three savings accounts should serve the purpose of having multiple bank accounts. But, if you have a salary account or a savings account linked with a SIP or EMIs, an additional account won't hurt. However, make sure you close down any unnecessary and unused accounts as soon as possible as they will only create an additional financial burden on you. Hence, it is advisable to have limited Savings Bank Accounts that you can easily manage.

Warm Regards,
Ketki Jadhav
Content Writer