Rabu, 11 Februari 2009

Avoid owning multiple savings bank accounts

A large number of people own savings accounts in several banks. Some are inherited from their previous jobs while some are opened to avoid tax deduction at source on fixed deposits. As the minimum average quarterly balance required to maintain these savings accounts increases in private sector banks, owing multiple savings accounts become a costly affair.

An increasing number of banks have hiked the average quarterly balance (AQB) in metros to Rs. 10,000; while most of them have the minimum AQB amount as Rs. 5000 in smaller cities. Thus, a lot of customer’s money is blocked to keep their savings accounts alive. For example, consider the case of a person having 5 savings accounts of AQB Rs. 10,000 each!

Secondly, having too many savings accounts and the need to maintain minimum AQB in each one of them pose the danger of not being able to meet the minimum AQB in one or two accounts, which leads to penalty charges. This is usually a huge amount in private sector banks (ICICI Bank charges Rs. 750 + Service Charge) as a penalty for not maintaining minimum AQB.

But above all, earning a paltry interest rate of 3.5% for your money in savings account, when you can earn a much higher interest of around 10% in Fixed Deposits, would not be a great idea. That is, if you have less number of savings accounts, less would be the money needed for maintaining minimum AQB in those and more would be the money available for Fixed Deposits.

If you notice that your savings account balance is over Rs 50,000, normally you would think of transferring some money to a fixed deposit. But if there is Rs 20,000 in multiple accounts, the thought many not cross your mind”, says a financial advisor, which is very true. So it’s better to own as less savings accounts as possible.

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