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Why You Shouldn't Let Your Savings Account Sit Idle?
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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The increasing penetration of various banking services has propelled many to hold multiple saving deposit accounts. While some individuals may open savings accounts to gain the benefit of better customer service and features, other bank accounts may have been opened by their past employer to deposit their salary. However, with time, a few additional bank accounts tend to become idle and hold the potential to impact your financial health. Discussed here are some reasons to not let your savings account sit idle.
1. Associated fees on your account may lower your balance
While most bank accounts do not charge any annual maintenance fees, debit cards with your bank account usually incur annual fees. Apart from the card annual charge, an SMS alert charge is even levied by the bank irrespective of the savings account usage. Such charges deducted directly from your bank account and continuous fees deduction over the years may make your average balance go below the Minimum Average Balance (MAB) requirement limit. This may further incur MAB non-maintenance fees, which may be as high as 6% of the shortfall.
2. Prevents you from earning higher returns
Leaving a specific amount idle in your savings bank account for a long time, while may earn you some interest, also makes you miss the chance of generating higher returns if invested in a recurring deposit or fixed deposit. Thus, keeping a sizeable amount in an inactive savings account is never a smart investment decision.
3. Conversion of the account into dormant or inactive status
If you make no banking transactions for over a year, then your savings account may convert into an inactive account. In case no transactions are performed for over two years, then your bank account may be termed as a dormant bank account.
While banks may not put any limitations on bank transactions through an inactive bank account, major services like phone banking, ATM transactions, and third-party transactions may be disabled until you reactivate them. In case of a dormant account, you may not be allowed to perform any banking transactions until you submit a request for reactivation.
4. Miss out on the benefits of a savings account
A savings bank account comes with various benefits in the form of reward points on transactions, sweep-in fixed deposits, special programmes, special offers on birthdays, surprise rewards on attaining transaction milestones, etc. Not using your savings account to make your transactions makes you miss out on all such benefits linked with your savings bank account.
In case you are not using a specific bank account, you must either transact at least once a month or close the account to avoid inactivity and penalties.
Ending note
Having multiple savings bank account come with various benefits like better cash management, higher flexibility, rewards, cash-back offers, vouchers, etc. However, in case you do not use any account and keep it idle, then you must consider closing the account. This is because continuing with an idle savings account levies higher penalties and missed opportunities of earning higher returns through alternative instruments.
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