Having multiple bank accounts might seem beneficial, but it can lead to financial losses if not managed properly. Experts suggest that for salaried individuals, maintaining a single savings account is more advantageous than having multiple ones.
A single account simplifies tracking your finances and makes filing income tax returns much easier as all financial information is consolidated in one place.
Potential Risks of Multiple Bank Accounts
- Increased Fraud Risk: Inactive accounts, often overlooked when switching jobs or opening new salary accounts, are particularly vulnerable to fraudulent activities. These accounts, when neglected, become prime targets for fraud.
- Credit Score Impact: Managing minimum balance requirements across multiple accounts can be challenging. Any oversight might result in penalties that could negatively affect your credit score.
- Higher Service Charges: Maintaining multiple accounts leads to multiple sets of fees, such as SMS alert charges and debit card annual maintenance charges, thus increasing your expenses. With a single account, these costs are minimized.
- Income Tax Complications: Interest income up to ₹10,000 from savings accounts is tax-exempt. However, multiple accounts can complicate this calculation. The total interest across various accounts might exceed this limit, thereby requiring TDS (Tax Deducted at Source) which might not be cut if tracked from a single account perspective.
- This unreported income can lead to tax discrepancies and potential fraud during income tax filing.
Key Recommendations
Consolidating your finances into one or a few necessary accounts ensures easier management, lower risk of overlooking any account details, reduced service fees, and more straightforward tax handling.
It reduces the administrative burden and potential financial vulnerabilities associated with multiple banking relationships.