Smart Tips for Managing Multiple Bank Accounts and a Good Credit Score

As India continues to inch towards the motive of complete digitization in the banking industry and also become aware of how to check my cibil score, more and more citizens are being connected to this financial revolution, especially through the opening of multiple savings accounts. And with the government’s zero balance saving accounts move and the demonetization announcement a few years back, the financial digitization process has somewhat begun to surely gain more traction.

A majority of those living in urban areas and metros hold more than one saving account due to varying reasons. While many acquire a new bank account on getting a new job or to satisfy their different financial goals, others open additional savings accounts to avail better account features, customer service etc. 

However, having multiple savings accounts has its own set of advantages and disadvantages. An analysis of these will help you decide whether you need multiple savings accounts or not. Also, it’s equally important to know what a good credit score is and how it impacts your financial health in multiple ways, besides, of course, the aspect of how you handle your bank accounts.

What works in favour of multiple savings accounts?

Higher ATM withdrawal limit- Since all savings accounts come with a daily ATM withdrawal limit, holding multiple savings accounts can add to your total daily withdrawal limit. Thus, multiple savings accounts allow you to distribute your bank balance across various accounts and withdraw more from the ATMs as and when you require. This can be helpful in inculcating healthy financial habits, including the task of how to check my cibil score and take steps to build or improve it, especially when handling multiple bank accounts as well.

For example, you have Rs.5 lakh in Bank X’s savings account, which allows a daily ATM withdrawal of up to Rs.50 000. Now, if you open another savings account with Bank Y, suppose and transfer an amount of Rs.1 lakh to that new account, which has a daily ATM withdrawal limit of Rs.75000. Your daily ATM withdrawal limit will hence increase to Rs1.25 lakh.

More free ATM transactions: Most of the savings accounts have an upper limit set for the number of free ATM withdrawals per month, beyond which a particular fee is charged per transaction. With multiple savings accounts, the number of free ATM transactions available to you increases. So in case when you frequently withdraw money from ATMs, more than one savings account will let you avail yourself of more free withdrawals per month.

A higher number of branch transactions- Most banks charge a certain fee for transactions beyond a certain limit for actions such as cheque clearing, cash deposits and cash withdrawals etc. Holding multiple savings accounts allows you to distribute those transactions between several accounts and reduce your overall banking costs by not exceeding that transaction limit above which the fee is chargeable.

Separation of accounts according to financial goals- There is no denying the fact that a credit score is crucial to achieving strong financial health and, subsequently, life’s financial goals too. And knowing the importance of monthly practice to check my cibil score also helps towards the same.

Not only that, another way of intelligently saving for different financial goals is to hold multiple savings accounts, with each account designated with a particular goal, which may be short term or even long term. Having a single savings account makes it difficult to save, and you may end up exhausting your resources and hence not meeting your financial goals timely. 

For instance, if you use your salary account for routing your investments, you will need to change your account details with every job change. However, you can simply avoid such a situation by opening a permanent savings account solely for the purpose of routing investments and parking surplus cash and continue using your salary account for day to day expenses and non-investment purposes. 

Acts as an alternative option in the event of disruptions- The banking industry is often affected by unions’ strikes, technical glitches or any other form of disruption which results in the non-functioning of many accounts or some other service being affected. Holding multiple savings will assist you in performing a transaction in case your primary account is unable to provide you with such service temporarily. 

Offers on debit cards- Nowadays, most debit cards offer various offers such as cashback, discounts, reward points etc. Having multiple savings accounts allows you to make online transactions, point of sale (POS) transactions on the basis of the best offer available amongst your cards. But do not confuse debit cards’ role as the same as credit cards for credit score computation. When you think about how to check my cibil score, remember that only credit cards and loans are factored in the calculation, and not debit cards, as the latter is not a form of credit.

What works against them? 

Lower returns-Most banks usually offer interest rates 2.5%-4% on savings accounts (some small finance banks offer better or higher rates of up to 6%-7% too),  while fixed deposits offer interest rates up to around 5.5%, with some SFBS offering higher rates of around 7% as well. 

So, holding multiple savings accounts will earn you lower interest than fixed deposits and debt mutual fund investments. A savings account would also incur charges and fees such as non-maintenance of average monthly balance, annual card charges, etc., which aren’t present in the case of FDs and debt mutual funds.

For instance, SBI or State bank of India is currently around just 2.5%-3% p.a. on savings accounts, whereas it offers as high as around 5.5% p.a. on fixed deposits at present.

Besides the lower rates that harm your financial health by denying wealth creation, an equally important thing that can damage your credit health is being unaware of what is a good credit score. It doesn’t matter at all how much you earn or whether you need a loan or credit card in the present or near future, it’s important to build and maintain a strong credit score and know all the aspects that impact it.

Higher risk of incurring additional charges/costs: Multiple savings accounts lead to a higher risk of incurring charges on non-maintenance of minimum or average monthly balance. Also, multiple savings accounts usually translate into multiple debit cards naturally, with each having its own annual fees/charges. Thus multiple savings accounts often lead to various charges, which may prove to be burdensome for many. 

Hassle of tracking multiple accounts- Holding multiple savings accounts imply that you have to keep track of multiple debit card pins, net-banking usernames and passwords, cheque books, minimum monthly average balances etc. failure of which may lead to trouble for the person, especially if you aren’t financially disciplined and also lack knowledge or are careless towards understanding what is a good credit score& the role it plays in your financial life.
Summing it up, besides developing the habit of putting a reminder in your mobile phone to check my cibil score every month, remember that the number of savings accounts that you need to have is a crucial anchor in handling finances. The number should be dependent on the type and frequency of your transactions and your financial goals. There isn’t any need for handling multiple accounts if you do not have a clear vision regarding your finances because this will only lead to problems in managing them, especially if you are unaware of what is a good credit score and what factors impact your credit score’s health.

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