There is no straight answer on the ideal number of bank accounts as each of us handles finances differently for different needs. But we can consider the pros and cons of different scenarios.
How do people end up with multiple accounts?
When changing jobs, most people have multiple bank accounts for various reasons such as a new salary account. Some people use a separate account for demat or investment purposes, for home loans, or even a government-owned bank account for specific requirement.
The upside of having multiple bank accounts
- Maximum Offers – Account holders get access to premium debit cards and can take advantage of rewards and discounts offered by various banks and maximize savings.
- Less reliance on one bank – With banks now heavily reliant on technology, there are chances that they may face temporary downtime, and if you have a bank account and get stuck at this stage, you may be stranded Especially if you need to make important transactions. Having multiple bank accounts can reduce this risk.
- Separate Account for UPI Transactions – The usage of UPI has skyrocketed over the years. As in the previous point, if the transaction cannot be done from one bank account, you can switch to another bank and complete the transaction. Many people also keep a limited amount of money in one of their accounts to reduce the risk of loss due to online fraudulent activities.
- Security and Insurance – Not many people may know this, but scheduled banks offer insurance of up to ₹5 lakh in your bank account in case the bank fails to pay you when the need arises. Hence, keeping all your funds in one bank account above ₹5 lakh can be risky. Having separate bank accounts will ensure that each of them is covered by insurance.
Now, let’s look at the downside.
a spotlight
- Maintaining Average Monthly Balance – Account holders will be required to maintain a minimum balance in their accounts at the end of every month or quarter, failing which a penalty will be levied. The minimum balance is between ₹5,000 – ₹10,000, so if you have five accounts, you’ll need to set aside ₹25,000 – ₹50,000.
- Trouble tracking finances – Keeping track of multiple cards, net banking passwords and check books can be cumbersome if you are not financially disciplined. Also, tracking transactions across all your accounts can be time-consuming.
- Possibility of Account Deactivation – Having multiple accounts means that you cannot actively use some of the accounts. According to RBI, if you do not use an account for more than two years, then it is considered inactive. This means that you may not be able to use any of the services offered and you may have to pay a penalty.
Having a single bank account has its advantages and disadvantages.
- Better control on expenses – All the money you get is available in one place and it is easy to manage your money.
- Easy to maintain balance – Generally, account holders are required to maintain a minimum balance with the bank to avoid penalties, and having a single bank account can be beneficial as the amount varies between ₹5,000 – ₹10,000 Will be
But having a single account also has its disadvantages.
- The problem of theft is a concern – with the rise of digital banking, there are also possibilities of fraud. If you have the same bank account and you become a victim of fraud, the impact will be significant.
- Multiple Goals in the Same Account – Having a single account can be a problem if you have multiple goals tied to your finances. If you have a single savings bank account and you are starting a business, then if you are expecting more than one transaction in a day, then the amount of transactions that a single account can provide is your goals will not be reached.
- Possibility of Server Crash – If you keep the same bank account and face server downtime, you will be stuck with no choice, especially if you need to make urgent transactions at critical times.
Enter Account Aggregator
A new technology called Account Aggregator (AA), developed by Reserve Bank of India and Consensus Organization, blends the benefits of having a single account with multiple accounts.
Simply put, the AA platform allows users to access their financial information from one bank account to another in a safe and secure manner. The core principle of the AA framework is ‘user consent-based data sharing’. It provides institutions with a better understanding of their customers to provide better and more personalized services.
Interlinking your accounts allows you to keep track of your money in one place, using different accounts for different purposes.
How do connected accounts help?
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Fi Money is one of the fintechs to build a product on top of the AA framework, with a new feature called ‘
linked accounts
, It allows you to link multiple bank accounts with the Fi Money app so you can have a comprehensive view of your finances in one place.
If you’ve connected UPI-based apps to one account for small spends and use your debit card with another account for large purchases, you can track them all using the connected accounts with the Fi Money app Huh.
Similarly, you can avoid paying penalties for not maintaining the required minimum balance on different accounts by monitoring them all on the Fi Money app. You will also be able to see your overall balance across all accounts.
For these benefits and more,
download fi money app
And open a digital zero minimum balance savings account in three minutes.