We open different accounts for availing better account features, cash management, salary credit and customer service. It is very common to have multiple bank accounts. There are chances that we tend to forget about some bank account only to realize that our savings have been deducted due to some charges. When you switch jobs every time a new company opens a new salary account in various banks, though they are zero balance accounts when the salary credit ends the bank will turn it into a savings account. Thus, minimum balance will come into the picture.
It is always better to maintain few accounts considering the best ones, rather than having multiple bank accounts and keeping some idle for years. Here are some of the reasons why you should close idle accounts;
Maintaining Minimum Balance
The majority of bank accounts require you to maintain a monthly average balance (MAB) of Rs 500 to Rs 2 lakh per month. When salary is not credited for three consecutive months, your account is converted to standard savings accounts, forcing you to maintain the average monthly balance. If you have multiple accounts, you need to maintain a minimum balance in all the accounts.
Also, when you don't maintain the required balance, the bank will deduct the charges depending on the account. The Bank will also deduct the debit card maintenance fees on a yearly basis if it is linked to your account. Consider if you have 3 idle accounts, and you maintain average balance and pay for yearly debit card fees, calculate how much you are paying even when you are not using the account.
If you wish to maintain multiple accounts make sure your debit card is not linked, and you have not availed of any other extra services which keep mounting every year.
maintain keep in a certain state, position, or activity; e.g., "keep clean" More (Definitions, Synonyms, Translation)
Inoperative/ Dormant account
As per the Reserve Bank of India (RBI) directive, if there are no 'customer-induced transactions' for more than 24 months, a bank account is automatically listed as inoperative or dormant.
If there are no transactions in the account for a period of two years, all savings and current accounts will be considered inoperative or inactive. Such accounts will be separated and held in separate ledgers.
To reactivate your inactive account, you will have to submit a written application. Alongside your reactivation application, you will have to submit fresh KYC documents.
The main disadvantage here is you will receive only 4% interest for the amount held in a savings account. Whereas if the same amount is held as a fixed deposit, it will fetch a higher return. If you have multiple bank accounts you need to maintain an average monthly balance in all the accounts except your salary account. The minimum balance maintained will get you a return of 4% only.
Dormant accounts are more prone to fraud as there will be less activity by the customer. There is no point in making the compilation of details and statements from so many banks making it difficult and overburdening when filing tax returns.
It is best to close idle accounts if you are not using them due to the above-mentioned reason. If you still want to continue you should be really careful to keep track of all the accounts.