Should You Have Multiple Bank Accounts? Check Benefits & Drawbacks (2024)

Today, we are going to talk about a unique question faced by many individuals – How many bank accounts should I have?

While the question might seem rudimentary at first, it can have a lasting impact on your finances.

There is no simple answer to this question since each individual’s finances are different and have different requirements. Hence, in this article, we will talk about the pros and cons of having multiple bank accounts and leave the decision to you.

How Do You End Up With Multiple Bank Accounts?

Many people don’t plan to have multiple bank accounts. However, they end up with them due to reasons like changing jobs but not shutting the salary accounts, opening a separate account for a Demat account, home loan, or specific requirement of an account with a nationalized bank.

Whether you are planning to open multiple bank accounts or find yourself holding many accounts, here are the pros and cons that you need to know to make the right decision.

Benefits Of Having Multiple Bank Accounts

Here are some benefits of having multiple bank accounts:

1. Easy Tracking Of Different Types Of Transactions

An individual can have different types of transactions from the savings account like Direct Benefit Transfer from the government (LPG subsidy, etc.), income tax payment and refunds, pension account, etc.

While all these transactions can be done from a single account, having a separate account helps in easy tracking of the transactions.

2. Reduced Dependency On One Bank

In today’s times, banks rely heavily on technology to allow access to your money.

If you have multiple accounts and face a problem with accessing one account, you can always transact using other accounts. This ensures that your work doesn’t get stalled.

3. Cost-Efficient For People With High-ATM-Usage

ATMs are the primary means of cash withdrawals today.

Most banks allow a fixed number of free ATM withdrawals every month. All subsequent withdrawals are charged. If you need to withdraw money regularly every month, then having multiple accounts can help you reduce ATM charges as you can withdraw from multiple accounts (different debit cards).

4. Separate Account For Online And/Or UPI Transactions

Over the last few years, online and UPI-based transactions have increased. However, this has also opened a new option for criminals to commit fraud and gain unauthorized access to your account.

Many people open a new account for online/UPI transactions and keep limited funds in the account. This helps limit the losses in the event of a breach of password.

Disadvantages of Having Multiple Bank Accounts

Here are some disadvantages of having multiple bank accounts:

1. Maintaining The Average/Minimum Balance In Each Account

Every bank account comes with a requirement to maintain a minimum balance in the account. This requirement can be a figure (like a minimum of Rs.1000 at all times in the account) or an average requirement across a quarter. Failure to do so usually results in a non-maintenance charge.

If you have multiple accounts, you will have to ensure that this minimum/average balance requirement meets all accounts.

2. In-Efficient Use Of Your Funds

Since you have to maintain a minimum balance in each account, your money will be blocked for the same. Hence, you will not be able to use your funds optimally.

3. Problems Relating To The Dormancy Of Accounts

If you don’t use an account for more than two years, then as per the guidelines by RBI, the bank has to change the status of your account from ‘Active’ to ‘Dormant’.

This means any service linked to this account will be stopped, and you might have to bear penalties or charges as levied by the bank. Further, dormant accounts are breeding grounds for criminals who use such accounts to make illegal transactions.

4. Managing and monitoring all accounts

Having multiple accounts means having to go through multiple account statements to ensure that all transactions are in order, keeping your contact information updated with all banks where you hold an account, and using the services offered by the account optimally. This can be time-consuming.

Key Takeaways

Having multiple bank accounts has certain pros and cons-

Pros include:

- - - Easy tracking of different types of transactions
    - Reduced dependency on one bank
    - Cost-efficient for people with high-ATM-usage
    - A separate account for online and/or UPI transactions

Cons include:

- - Maintaining the average/minimum balance in each account
  - In-efficient use of your funds
  - Problems relating to the dormancy of accounts
  - Managing and monitoring all accounts

Summing Up

As you can see, having multiple bank accounts poses a lot of challenges to you. Hence, before opening another savings account, ensure that you assess your financial situation carefully.

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted here are not recommendatory.

FAQs

Should You Have Multiple Bank Accounts? Check Benefits & Drawbacks? ›

If you're concerned about fraud or being locked out of an account for any reason, you could keep a second checking account with enough cash to cover your expenses as a backup. Meanwhile, if you have high cash balances in bank accounts, you might want to spread cash among different banks to maximize FDIC coverage.

Learn More Now ›

Should you have multiple bank accounts? ›

Multiple accounts can help you separate spending money from savings and household money from individual earnings. Tracking savings goals. Having multiple bank accounts may help track individual savings goals more easily. Separating finances.

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What is the drawback of multiple bank accounts? ›

Loss of interest:

Spreading funds into multiple accounts can result in loss of interest because many banks offer higher interest on higher deposited amount.

Is there a downside to having multiple savings accounts? ›

Con: Keeping track of your accounts

One downfall of having multiple accounts is that it can be difficult to keep track of them all and to remember which account is for which savings goal. Having said that, there are a few tricks you can use to keep them hassle free and organized.

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What are the pros and cons of a checking account? ›

The primary benefit of checking accounts is the ability to store money you intend on spending, either through debit card transactions, checks, or cash withdrawals. However, the downside is they typically don't pay interest.

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Is it healthy to have separate bank accounts? ›

Key takeaways. Keeping separate bank accounts after marriage could help you stay engaged with your money. Paying for shared expenses could mean using bill-splitting apps and extra planning for emergencies, but it's worth it for some couples.

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Can having too many bank accounts be bad? ›

Don't Lower Your Credit Score

Unlike too many credit cards, multiple checking accounts don't directly affect your FICO score or your ability to obtain credit.

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Is there a downside to having two checking accounts? ›

Having multiple checking accounts could also mean more maintenance — and more fees — from the bank if you fall below the minimum balance requirements or inactivity thresholds. Be sure to stay on top of your finances to avoid paying any unnecessary fees or losing out on accruing interest.

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Is there a downside to having multiple current accounts? ›

Opening too many can affect your credit score

Every time you open an account, it is recorded on your credit history. Applying for too many bank accounts, particularly during a short period of time, whether you have been accepted or not, can have a negative impact on your credit score.

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Are there benefits to having all of your accounts in the same bank? ›

APY = Annual Percentage Yield. APYs are subject to change at any time without notice. Many banks reward loyal clients with special perks, such as higher interest rates or fee discounts. It's easier to manage your financial accounts if you have them all with the same bank.

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How many bank accounts should a person have? ›

According to financial experts, it isn't advisable to open more than three Savings Accounts, as it can be difficult to manage. Apart from having a minimum balance in each account, banks might also mark an account dormant if there is no activity for a period of time.

Is it illegal to have accounts with multiple banks? ›

Yes, it is legal to open up multiple bank accounts in the US. Many people in the US have both a Checking and Savings account with one bank. Although around 50% of American's stick to one bank, the other half of Americans have bank accounts at multiple banks.

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Does closing a bank account hurt your credit? ›

The act of closing a bank account, such as a checking or savings account, does not directly affect your credit score. Your credit score is not directly affected by your checking and savings account activity. That includes account closures.

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How many bank accounts does the average person have? ›

General bank account statistics

According to a survey published in 2019, the average consumer in the U.S. has a total of 5.3 accounts across financial institutions. The share of households without access to at least one banking account has decreased consistently since 2011.