The first foray into using personal banking services is opening a savings account. A savings account is essential to access a line of credit, like personal loans, digital wallets, paying EMIs and other bills. Such services can only be availed with an active savings account. In addition, savings account with renowned banks offering a higher interest rate bring reasonable earnings over the years.
Many individuals hold multiple savings accounts due to changing cities or jobs. In such cases, you may be saddled with many dormant accounts. Several reasons may cause an individual to worry about an unused savings bank account.
Here are the 4 solid reasons why leaving your savings account unused is not a good idea.
1. Your Savings Account will Become Dormant.
As per Reserve Bank of India (RBI) rules, if an individual has not made any financial transaction in their savings account in the previous 24 months, it will be classified as an inoperative account and becomes dormant. The bank will not allow you to access your money in the account.
You will have to complete the KYC process again to reactivate your account. It will be quite a hassle, especially in times of need for your money. Furthermore, if a savings account remains dormant for a very long period (10 years), the bank may transfer the account balance with interest to the RBI’s Depositors’ Education and Awareness Fund. You will have to complete a lengthy documentation process to recover these funds.
Note: Interest credit or debit of service charges are system-generated transactions and are not considered valid transactions to keep your account active.
2. You will have to bear penalties.
You must maintain a minimum average balance in your savings accounts that varies from bank to bank. It can be as low as Rs.1000 or as high as Rs.10,000. When it is an inactive savings account, the chances of insufficient funds to maintain the minimum balance increase.
This non-maintenance attracts a penalty and ultimately leads to the depletion of your account balance gradually. Ultimately you will lose on the savings account interest due to penalty deductions.
If it is an inactive salary account, it will be turned into a regular or basic savings bank account automatically after 3-6 months. Failing to maintain a minimum average balance will attract a penalty. It may eventually make your balance negative – enough to spoil your relationship with the bank.
3. You will miss out on your savings account benefits.
A savings account is not just a safe vault for your money. Banks offer numerous facilities and specific benefits with a regular or basic savings bank account, like debit and credit cards, pre-approved loan offers, reward points, and Flexi fixed deposits. An inactive savings account does not allow you to issue cheques, renew your ATM, or process an address change request.
Some accounts offer free fund transfers for up to a limit, demand draft facility, and bill pay services at a negligible cost. You can add more to your savings account with many beneficial transactional activities. An inactive savings account deprives you of such benefits.
You can keep an account active by transacting in the account at least once a year. Otherwise, it is good to close the account and avoid penalties.
4. Scamsters can misuse your savings account.
An inactive savings bank account remains on the radar of fraudsters. They can misuse your account by updating false information, like mobile numbers and email IDs.
You may never know if your account has become a medium of illegal activities. Therefore, submit KYC (Know Your Customer) documents with the date and the reason for submission whenever your bank asks.
Thus, if any of your savings accounts get out of your mind and you let it dry up, there will be monthly penalties for non-maintenance of the minimum balance.
It will lead to an unnecessary hole in your pocket. Also, multiple savings bank accounts can complicate or overburden you while making your income tax return (ITR).
You must gather information and statements from different banks while filing tax returns. Ensure that you hold a limited number of savings accounts, one or a maximum of two, that are manageable without any hassle.