Savings

Close your savings bank account? Steps to follow before doing so

Here’s what you need to know about closing your savings account

Several savings accounts in one bank or in different banks can sometimes have certain advantages. Many people open multiple savings accounts to deposit their money with different banks to get more benefits, including higher interest rates.

After a certain point, they fail to maintain sufficient balance on all accounts and stop using more than one account.

The general practice is to withdraw all money from the savings account and abandon it. However, an active account, whether managed by the client or not, may incur certain charges such as an average monthly balance non-maintenance fee and others.

It is advisable to close the account if you no longer wish to use the service. An inactive account is also at risk of being used for financial fraud.

You can close the bank account by visiting your home branch or by making a request to customer support services. Before closing a savings account, check a few details and follow simple steps for your financial security.

1. Check the account balance and keep track of the statement:
It is important to check the balance of your savings account that you wish to close. Check the balance, download the statement and keep a record of the statement for at least the last 2-3 years.

This will be useful for future reference should you need to verify the details of any transaction made through the particular account. The declaration is also important for the filing of the tax return.

2. Pay outstanding balances and service charges:
Your bank may not allow the account to be closed if the balance amount is negative.

Negative balance may be due to not meeting minimum balance and other service charges or fees. Negative numbers on your savings accounts will also affect your credit score.

3. Standing Instructions and Automated Authorizations:
If you use the particular account to pay EMIs, bills, and monthly subscriptions, cancel any such standing instructions or automated authorizations related to the savings account.

Closing the account without canceling payment instructions may result in the loss of payment cycles. Failure to make payments on time will create a negative credit score and affect your future financial prospects.

4. Account closure fees:
Many banks charge an account closure fee if the savings account is closed within a certain time from the date it was opened.

Typically, banks charge a fee for closing the account within one year of opening it. To avoid paying account closure fees, you must wait at least one year before closing the account in question.

5. Update Account Details:
The savings account you wish to close may be linked to EPFO, insurance policies, income tax service and other government savings schemes.

In such cases, before initiating the account closure process, update the new account details on all such services and savings plans. This will help you enjoy the benefits of the scheme and continue all transactions without interruption.

Many clients use savings accounts for mutual fund investments for Systematic Investment Plans (SIPs).

When you withdraw money from your mutual funds, the amount is also credited directly to your savings account. In such cases, before closing the account, update the new account details on all your mutual fund investments.