In today’s digital world, banking plays a crucial role in our everyday lives. With the widespread use of UPI, internet banking, and mobile apps, managing finances has become easier than ever. However, while having a bank account is essential, maintaining multiple bank accounts can sometimes do more harm than good.
Many people open two or more accounts for different purposes—salary deposits, savings, investments, or even just offers. But if you’re managing more than one account, you need to be aware of some major disadvantages. Let’s take a closer look at four key drawbacks of maintaining multiple bank accounts.
1. Funds Get Locked in Multiple Accounts
Each bank account typically requires a minimum balance to remain active. If you have several accounts, you’ll need to keep a portion of your money idle in each one just to meet these requirements. Over time, a significant amount of your funds may end up sitting unused across your accounts.
This money earns only a low interest rate of around 4–5% annually in savings accounts. In contrast, investing the same amount in other financial instruments like mutual funds, fixed deposits, or PPF could give you better returns. So, by spreading your money thinly across multiple bank accounts, you could be losing out on higher potential earnings.
2. Extra Maintenance Charges and Service Fees
Having more than one bank account also means dealing with multiple maintenance fees. Many banks charge an annual fee for services such as debit cards, internet banking, and SMS alerts. These charges may seem small individually but can add up quickly when applied to multiple accounts.
Additionally, you may also incur penalties if you fail to maintain the minimum balance in any of these accounts. Over time, these service costs can eat into your savings without offering much benefit in return.
3. Negative Impact on Your Credit Score
Keeping several bank accounts, especially inactive ones, can affect your credit score. If any of your accounts fall below the required minimum balance or remain inactive for long periods, it could be flagged during credit evaluations.
Banks and financial institutions consider poor account management as a negative sign, which may result in difficulty getting approved for loans, credit cards, or other financial services in the future.
4. Complications in Filing Income Tax
During tax season, having multiple bank accounts can create additional stress and paperwork. You are required to report income and transactions from all your accounts while filing your income tax return (ITR). The more accounts you have, the more statements and details you need to track and organize.
Failure to report any account, even unintentionally, can lead to scrutiny or questions from the Income Tax Department. This not only complicates the filing process but may also invite penalties or legal issues.
Salary Accounts Can Convert to Savings Accounts
One more thing to consider—if you change jobs, your salary account may stop receiving payments. After a few months of inactivity, your salary account automatically converts into a regular savings account, which follows different rules.
Unlike salary accounts, savings accounts require a minimum balance. If you fail to maintain it, the bank will begin deducting charges from your balance. This can catch many people by surprise, especially if the account is no longer actively used.
Final Thoughts
While there may be specific reasons to maintain more than one bank account, it’s important to understand the hidden costs and administrative burden it brings. From idle funds and lower returns to extra charges and tax complications, having multiple accounts can impact your financial health more than you might expect.
If you do need more than one account, make sure each one serves a clear purpose and is actively managed. Otherwise, it may be wise to consolidate and close unused accounts to streamline your finances.
Disclaimer: This article is based on information originally published by Hr Breaking, edited and rewritten for clarity and SEO optimization. All rights remain with the original source.
