How many bank accounts do you need? (2024)

The number of bank accounts you have can play a crucial role in how you manage your finances. With the latest trends in online banking, opening a new account online has become seamless and convenient without taking up much time. But that doesn’t mean you should open as many accounts as you can.

There is no straightforward answer on the ideal number of bank accounts to have since each of us handles finances differently for different requirements. But we can consider the pros and cons of different scenarios.

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How do people end up with multiple accounts?
Most people end up having multiple bank accounts for various reasons such as a new salary account when changing jobs. Some people use a separate account for demat or investing purposes, for a home loan, or even a specific requirement of an account with a government-owned bank.

The upside of having multiple bank accounts

• Maximising offers - Account holders get access to premium debit cards and can also take advantage of the rewards and discounts offered by various banks and can maximise on savings.

• Reduced dependency on one bank - With banks now relying heavily on technology, there are chances that they may face temporary downtime, and if you have one bank account and get caught in this phase, then you’re stranded, especially if you need to make crucial transactions. Having multiple bank accounts can mitigate this risk.

• Separate account for UPI transactions - The use of UPI has skyrocketed over the past couple of years. Similar to the previous point, if a transaction from one bank account cannot be done, you can switch to another bank and complete the transaction. Many people also keep limited funds in one of their accounts to reduce the risk of loss that may occur due to online fraudulent activities.

• Safety and insurance - Many might not know this, but scheduled banks offer insurance to your bank account upto ₹5 lakh in case the bank fails to pay you when needed. Hence, putting all your funds in one bank account exceeding ₹5 lakh can be risky. Having different bank accounts will ensure each of them is covered by insurance.

Now, let’s look at the downside.

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• Maintaining the average monthly balance - Account holders will need to have a minimum balance in their accounts at the end of every month or quarter, failing which attracts a penalty. The minimum balance ranges between ₹5,000 - ₹10,000, so if you have five accounts, then you will have to set aside ₹25,000 - ₹50,000.

• Trouble tracking finances - If you’re not financially disciplined, then keeping track of multiple cards, net banking passwords and cheque books can be cumbersome. Moreover, keeping track of transactions for all your accounts can be time-consuming.

• Possibility of account going dormant - Having multiple accounts means that you may not use some accounts actively. As per RBI, if you don’t use an account for more than two years, then it is deemed dormant. This means you may not be able to utilise any services offered and may end up paying penalties.

Having a single bank account has its own advantages and disadvantages.

• Better control of expenses - All the money that you receive is available at one place and it is easier to manage your money.

• Easier to maintain balances - Normally, account holders are required to maintain a minimum balance with the bank to avoid paying penalties, and having a single bank account can be beneficial because the amount will be between ₹5,000 - ₹10,000.

But having a single account has its downsides as well.

• Theft issues are a concern - With digital banking rising, the possibilities of fraud are also there. If you have a single bank account and become a victim of fraud, then the impact will be significant.

• Multiple goals in a single account - If you have multiple goals aligned with your finances, then having a single account can be a problem. If you have a single savings bank account and are starting a business, the volume of transactions that a single account offers will not be able to live up to your goals if you’re expecting multiple transactions in a day.

• Possibility of server crash - If you hold a single bank account and face server downtime, then you will be stuck with no alternatives, especially if you need to do immediate transactions at a crucial time.

Enter the account aggregators
A new technology called the account aggregator (AA), developed by the Reserve Bank of India and the Sahamati organisation, blends the advantages of having a single account with those of having multiple accounts.

To put it simply, the AA platform allows users to grant access to their financial information from one bank account to another financial institution in a safe and secure manner. The basic principle of the AA framework is ‘user consent-based data sharing’. This gives institutions a better understanding of their customers to offer better and more personalised services.

Linking your accounts with one another allows you to keep track of your money in one place while using different accounts for different purposes.

How does connected accounts help?

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Fi Money is one of the fintechs to build a product on top of the AA framework, with a new feature called ‘Connected Accounts’. It allows you to link multiple bank accounts with the Fi Money app so you get a comprehensive view of your finances all in one place.

If you have connected UPI-based apps to one account for small spends and use your debit card from another account for large purchases, you can track them all with the Fi Money app using Connected Accounts.

Similarly, you can avoid paying penalties for not maintaining the required minimum balance on different accounts by monitoring them all on the Fi Money app. You will also be able to see your overall balance across accounts.

For these benefits and more, download the Fi Money app and open a digital zero minimum balance savings account in three minutes.

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