It is common for individuals to hold more than one savings accounts. These may have been opened for various reasons associated with your previous employment or previous residence and unless you are actively using them for a purpose, you are wasting the idle money's potential to work for you.
Investment advisors often say that the aim is not to work hard to generate income but to be able to make money in your sleep. This can only be done using ways to multiply your savings rather than keep it idle.
Savings accounts offer the least interest rates of all the products as they are highly liquid. Typically, you will be earning 3.5 to 4 percent. If you have been not using the money in your savings account for a long time and it is not part your emergency fund, then it is wise to move the amount to a better yielding product based on your risk appetite.
Mutual funds could fetch you between 5 to 15 percent (depending on the category and fund manager) and a fixed deposit could get you as high as 9 percent guaranteed returns.
The money that now sits idle in the bank could be put to good use and help you achieve some of your financial goals.
Alternative modes of liquidity
If the purpose of maintaining your savings account is to have quick access to your saved earnings, you can look at alternative ways to keep the money liquid than the traditional way.
For example, liquid funds is one such good option that comes with a similar kind of assurance and with the ability to fetch higher returns. Note that like any other mutual fund, there are no guaranteed returns but in the recent past, it has been observed that these could fetch you as high as 8 to 9 percent returns, which is higher than any typical savings account.
The fund managers invest the corpus on fixed income instruments that come with good credit ratings, thereby reducing the risks associated with it.
Additionally, these come with a redemption period of 'T+1' days, which means that if you place a request before 3 pm on a trading day (I.e not a holiday for markets), you should ideally receive the money on the same day or before 11 am of the next trading day.
When a bank notices that there has been no activity from the customer's end on the bank account for 12 consecutive months, the bank will contact the account holder. If the bank receives no response, it will begin the procedure to change the status of the bank account to 'inactive' and eventually to 'dormant' as per RBI guidelines to avoid misuse or fraudulent activities with these funds.
Your account will continue to earn interest but in order to access the funds, you will need to apply for reactivation which involves redoing the KYC procedures as per the bank's policies.
Not using the account for as long as 12 months is indication enough that the money has just been lying there without purpose and the account holder could do without the funds. There lies an opportunity to put that money to good use.
Maintaining minimal balance and other banking charges
Any banking service comes with its associated service charges and requirements. Same goes for a savings account where besides service charges, one needs to maintain the minimum account balance.
This minimum balance could be as low as Rs 500 or as high as Rs 2 lakh, depending on your bank. Even zero balance accounts for students or salaried accounts will eventually deem to become normal savings accounts.
For example, banks typically allow a 3-month wait period for the bank account to credit salary before it is converted into a normal savings account by default and the customer will be charged with a fine for non-maintenance of minimum balance requirements of the bank.
The charges for non-maintenance of minimum balance are pretty significant and will keep adding on as the months go by. It is best not to ignore the bank text messages that you receive with regard to the same and close the account if needed.