Shut unused bank accounts

It is common for most people to have multiple bank accounts — typically, one salary account for every job they have had, and at least one account in every city they have lived in. It is also common for people with multiple accounts to not pay attention to what is going on with some of their accounts. The surplus accounts may be operated minimally or not at all. Any account that has not had a transaction in 12 months is labelled an inactive account. Any account with 24 months of inactivity is classified as a dormant account.

It is advisable to prune your list of bank accounts, limiting them to must-have accounts while closing the rest. If you continue to have too many accounts that you operate minimally, you may be disadvantaged in certain ways that we will discuss here.

Charges
Most bank accounts are not free. As a customer, you have to pay charges towards various banking services such as debit card fees, SMS alerts fees, etc. Needless to say, the more such bank accounts you have, the more you will be coughing up towards these assorted fees every year.

Minimum Balance
A typical savings account needs you to maintain a minimum balance. With banks located in urban areas, this balance could be as high as `20,000. Not maintaining this balance comes with penalties. The more such accounts you have, the more cash you need to maintain in them collectively.

Salary Accounts Become Savings Accounts
Salary accounts have several benefits including zero balance facility where you don’t need to maintain a minimum balance. However, when a salary account no longer receives regular salary credits, its benefits cease. Most banks convert such salary accounts into regular savings accounts. Once this happens, all the rules-and penalties-of a regular account apply.

Low Returns
When you need to maintain minimum balance in several accounts, you are using your funds in a less than ideal way. Your funds would earn no more than four per cent in a year. But invested in avenues such as fixed deposits or mutual funds, they can generate higher returns.

Services Cease
Once an account becomes inactive, you would not be able to ordinarily carry out service requests such as ordering for a new cheque book. After the account becomes dormant, you may even be unable to carry out transactions. It is advisable to keep a tab on your accounts and keep making minimal transactions to keep the account in an active state.  

Misuse
If you have several bank accounts, you may find it challenging to keep an eye on your statements. Not tracking your accounts is also a risk. If any of your inactive accounts are flush with funds, and if they come to the notice of unscrupulous persons, they may start looking at ways to siphon off your funds. You can reduce your risks by keeping a number of accounts that you find easy to track regularly.

Tax Filing
With too many accounts, you would find it tricky to keep track of all your receipts and interest earnings. With a small number of accounts, you can quickly take stock of your earnings, thus simplifying your tax filing process.

The writer is the CEO of BankBazaar.com