This is a burning question every individual in their financial journey will have at some point in time – is opening bank accounts in multiple banks a wise thing to do? Let’s be honest, it’s easy to open bank accounts in different banks because of the tempting offers each one provides. But there is no absolute answer to this question – opening a having multiple accounts and having a bank account is a personal choice and depends on an individual’s finances. So it’s better to look at the advantages and disadvantages of having multiple bank accounts so you can have an overview of both sides.
Understand the Purpose Of Having Multiple Bank Accounts
- Understand the Purpose Of Having Multiple Bank Accounts
- Benefits Of Having Multiple Bank Accounts
- Disadvantages of Having Multiple Bank Accounts
- Key Takeaway – Is Having Multiple Bank Accounts A Good Idea?
- Frequently Asked Questions
Bank accounts are similar to financial instruments. Each tool has a specific function. You’ll need a bank account to pay your utility bills and withdraw cash for other expenses, for example. You’ll probably need a separate account where you can deposit your savings and possibly invest the proceeds.
You’ll need a separate account for commercial transactions if you’re running a company. It’s important to remember that, no matter how tiny your organization is, you can’t mix business and check transactions in the same account for tax purposes.
If you wish to earn interest on your savings/deposits, for example, you’ll need to open a Certificate of Deposit (CD), Fixed Deposit, or Recurring Deposit account.
If you have a spouse, it is recommended to have checking accounts separately for each one so that the balances and transactions can be tracked and analyzed easily. Many retirement accounts ask to have individual owners only.
Takeaway – Therefore, if you have varied reasons for bank accounts, it might be inevitable to have multiple bank accounts. Jot down the purposes for which you need bank accounts, that must give you an overall count of accounts you need to create (maybe not at the same time!).
Benefits Of Having Multiple Bank Accounts
- Keep track of various types of transactions
As previously stated, you can categorize different sorts of transactions and create separate accounts for each. A checking account, for example, is used for daily transactions, a savings account is used for savings, and a deposit account is used to generate interest on lump-sum deposits. Certain transactions can be completed with a single account, but having many accounts makes things easier.
- Reduced reliance on a single bank
There may be times that your bank may be experiencing downtime, or there may not be ATMs of that bank in access nearby. So if you have multiple bank accounts, you can always transact the amount using one account if you have problems accessing the other. This will ensure that the downtime or issues with the bank do not stall or stop your work.
- Establish a Savings Habit
If you want to have many savings accounts, this is extremely important. Having a single savings account into which you deposit all of your money may tempt you to squander it. You can, on the other hand, set up automatic transfers from your checking account to your savings account so that each account’s balance grows. Often, the banking website/mobile application will have an automated transaction option built in.
- Employ a variety of bank bonuses
Banks use a lot of exciting bonuses to draw customers. This can happen through bonuses in accounts, or credit/debit cards that the bank issues. In some banks, you might be eligible for a bonus if you maintain a minimum balance in your savings accounts for some time. These bonuses can be more than hundreds of dollars, so it makes sense to make use of them. Not just that, if you have debit/credit cards that provide rewards for a specific purpose of spending, having them can help you make your spending more efficient. These bonuses can only help you accelerate your savings.
- Optimize for increased ATM usage
ATMs are the most common way to get cash from your bank. The majority of banks have a monthly withdrawal limit. If you take money from your account frequently, having numerous accounts will save you money on ATM costs. However, before opening an account with a bank, keep in mind the fees for withdrawing money from various ATMs.
Disadvantages of Having Multiple Bank Accounts
- Keeping each account’s minimum balance
Most bank accounts demand that you keep a minimum amount in your account. If you do not comply, the bank may levy additional costs against you. Having many bank accounts can be a pain since you must maintain a minimum amount in each one, which may vary based on the type of account and the bank.
- Keeping track of credentials can be difficult.
Every bank account will have a secret pin, user credentials for net banking, security codes, and so on. It may be more difficult to recall them all at once, and writing them down can be dangerous. Furthermore, due to security issues, retrieving any of the critical information is frequently a problem. Having fewer bank accounts alleviates this problem.
- Charges from debit and credit cards may add up.
Every bank that issues a credit or debit card may have an annual fee linked with it. If you have various bank accounts, you may be required to pay fees for multiple cards, which can quickly add up. If you use a high-end debit or credit card, the fees could be substantially greater.
- Usage Routine Otherwise, accounts may become inactive.
You must make use of all of your bank accounts if you have more than one. If an account remains inactive or dormant for an extended length of time (with no to and fro transactions), it may be categorized as inactive or dormant. All services associated with your account may be suspended, and you may be required to pay a penalty to the bank. It can also be difficult to retrieve your account bank. Dormant accounts are particularly dangerous since criminals frequently use them to carry out unlawful transactions.
Key Takeaway – Is Having Multiple Bank Accounts A Good Idea?
There is no such thing as an absolute number. Nonetheless, the general rule is to avoid having multiple accounts for the same type of activity (savings, checking, business, etc.). But, if you are competent of managing many accounts simultaneously and their complexity, you can go ahead and use them to reduce ATM fees, bonuses, and other expenses. There are specific applications that can assist you check balances and perform basic account activities all in one place. Check them out, but make sure they’re legitimate before using them.
Also Read: India’s Top 10 International Banks
Frequently Asked Questions
How many bank accounts can I have?
In most cases, there are no restrictions. Check with your local government and bank, though.
How to open a bank account?
Basic documents are frequently requested. Personal identity evidence, address proofs, and other supporting income proofs (if necessary) are among them.
Is having a bank account useful?
Yeah, having a bank account is nearly a requirement for everyone. It allows you to keep your money safe and conduct multiple online transactions.
Is it possible to maintain zero balance in bank accounts?
Sure, several financial institutions offer zero-balance accounts. You are not required to maintain a minimum balance here.
What are the steps to close the account?
You can do it either online via netbanking or in person at the bank. If you are not using the account, it is recommended that you close it.