You would be able to manage your finance and save money if you have the least bank accounts as possible.
Many people I know tend to end up with at least 5 different bank accounts (savings or current) from different banks. In the past, people end up opening bank accounts because of salary crediting, loans (banks usually require them to set up some kind of standing instruction from the bank account) and being approached to participate in offers which require opening of bank accounts.
However the advancement of online payment, it has become really easy to manage payroll and standing instruction. Hence it is no really necessary for us to have so many different bank account.
Why it is not good to have so many bank accounts:
1. You will be charged if the account gets inactive and after 7 years, your money goes to unclaimed monies
If you do not have any activity in your account for 1 year in your Savings and 6 months in your Current Account, you will be charged with service charge. Usually the charges cannot be waived. Reason of the charge being imposed is to cover the operating cost of your account (yes, even if you do not have transaction, there is cost involved to maintain and upkeep the account).
Do note that interest crediting is not considered as a transaction. What is considered as a valid transaction is something that can be traced back to the owner. For example online transfers/transactions performed using the account, cash withdrawal and over the counter transactions. Usually cash deposit via the CDM (Cash Deposit Machine) is not considered as a valid transaction. Your bank may also start charging you for statement fee when they are sending monthly statements to you (since nowadays banks are phrasing out passbooks and replacing with statements).
After 7 consecutive years of no proven activities from the account holder, the funds in the account gets sent to Unclaimed Monies, meaning the money is out of the bank. And you need to go separately to get back your money from Unclaimed Monies.
2. Harder to manage so many accounts
We really need to ask ourselves honestly how many bank accounts that we actually need. How many bank accounts do you have, and out of those, how many accounts are actually active?
Nowadays, some banks are not so keen to open a new account for you. Especially if you are attempting to open an account that is far away from your permanent address. Most of the time, you would be even asked for supporting documentation such as electricity bill and tenancy agreement to show you are indeed staying near the location of the bank. Why banks are doing this is part to get to know their customers, as well as to ensure that the account will not fall into inactive status, resulting the customer coming back to complain about the inactive service charge.
Few years ago, I had thought that I wanted to sell some of my older stuff online. So I went and open a bank account at the location near my home. Even when I could produce my NRIC (indicating I stayed near the bank), I was still asked for supporting documentation such as utility bills addressed to my name in that address.
After a while, I abandoned the online venture and that account unfortunately has gone inactive. I have been since charged with the fee of RM10 before realizing that I did not operate the account for a year already. So before we open a bank account, it is good to think really carefully if we really need another new account.
Managing your finance with minimal bank accounts
Merging the function and closing down inactive accounts
To me, having 2 bank different bank accounts would be sufficient. With the convenience of instant transfers (via Duit Now), funds can be made available immediately. So it is not necessary that you need to have the same bank accounts for each of your credit cards.
I always remember the advice that a friend had given me years ago about managing bank accounts. She shared with me this as years ago I’ve had problem with saving money. It was back in the days before internet banking was as common. She holds a high corporate position and manages her finances very well. She told me she only have 2 bank accounts. One with ATM access and another without. The account with ATM access is also the same account where her salary is credited.
She sets up a standing instruction to have a fixed amount of money transferred from her salary account to her account (the one without the ATM card). The instruction runs each month on the next day after her salary crediting day. So each month, she would have money put aside. And because the receiving account is the one without ATM or online access, the only way she could get the money is she had to be physically present to the bank counter to withdraw. From time to time, she would then go to the counter and have the funds in her bank account converted to fixed deposits or into investments.
She told me that this simple method had helped her save substantially compared to the past when she find she used up all her money because it was in her bank account.
The method I employed when I was working to help save money:
When I was working previously, each month I would schedule a fixed day (a day after salary day) to do the following with my salary crediting account:
- pay my credit cards and utilities bill via online banking
- set up new online FD accounts to put aside the money
This is because I tend to overspend when I see a balance in my account. I would estimate the expenses I will need to incur that month and quickly put away the extra into online FD accounts. This simple practice had helped me save much more money than I did in the past.
Cancelling Checking/ Current accounts
I have canceled all my checking/current accounts because with the ease of online transfer, it is no longer necessary to have a chequebook. Furthermore issuing a cheque is more expensive and troublesome. Sometimes when it gets bounced due various reasons we are also fined by the bank. The government is also discouraging it and have imposed fees such as cheque processing fee to deter people from issuing cheques and move towards online transfer.
Don’t open new accounts because of offers and promotions, bells and whistle
There may be offers and incentive for you to open new accounts. But if you do not need the account, 6 months or 1 year down the line you would be charged with service charge for an inactive account. Most of the time, the hype is not worth the hassle.
If you are just a salaried employee and not a business owner, actually one account is enough. Maybe you might wish to keep another one in another bank just in case your bank system is not available (due to some kind of maintenance) and you need money immediately. Or if you are doing online ecommerce, it is advisable to have a separate bank account (than your main account) as you would be revealing your account number openly for buyers to pay you.
For me, I do not sell anything online. I use the same bank account for my transactions as well as credit payments for my Google and affiliate earnings. And then another spare account where sometimes I use to put money that I am setting aside for something. The rest, well, I really do not need them.
I find that just with just having minimal accounts, it reduced a lot of hassle, unnecessary charges as well as paper clutter from letters and statements that different banks are sending me. Hopefully, this would be useful to you as well.