How to avoid running multiple accounts you don’t need

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Most people need some sort of current or savings account, whether it’s at a traditional bank, microfinance bank or a brokerage company. But most people don’t need multiple bank accounts that serve more or less the same purpose, according to bankrate.com.

Indeed, there are good reasons not to open extra bank accounts, even if an interest rate bonus or other attractive perk is on offer, an associate professor and director of graduate personal financial planning programmes at Georgia State University in Atlanta, Conrad S. Ciccotello, says.

The bottom line is that most people should “fight the temptation” to open more accounts and reflect on whether the accounts they’ve already opened are necessary, Ciccotello says.

“If you can open one less account, do it,”he says.

Reasons not to run multiple accounts you don’t need:

• Risk identity theft

Experts have said that the more bank accounts you operate, the riskier it is for you to become a victim of identity theft.

“The more accounts you have, the bigger the risk of identity theft and the more monitoring you need to do. More accounts also mean more maintenance fees and more potential for inactivity fees or overdraft fees,” Ciccotello says.

• Bank account fees add up

Fees are a top concern. That’s because multiple small fees can and do add up over time and have “a corrosive effect” on the account balance, according to Ciccotello. Consider that a N150 monthly fee on one account adds up to N1,800 each year. Multiply that by, say, three accounts and the total jumps to N5,400. The easiest way to save N3,600 is to not open those extra accounts.

Years ago, people who had large sums of money in deposit at one institution often had carte blanche to open multiple accounts on which the fees would be waived, says Gregory B. Meyer, community relations manager at Meriwest Credit Union in San Jose, California, United States.

But today, few institutions are so generous. One reason is that banks incur costs for paper, printing, postage and processing to send out monthly account statements and those costs put another dent, however, small it may seem, in the institution’s bottom line. More loans are, in fact, more valuable to a bank than more deposits are.

• More accounts may mean more infractions

Another problem of multiple accounts is that different banks have different policies with respect to deposits, payments, withdrawals, interest rates and so on. Someone who opens multiple accounts at different institutions and becomes confused about the different policies can easily incur extra costs for a long list of services or infractions.

“Multiple accounts in multiple places means multiple disclosures in fine print,” Ciccotello says.

Some people try to use multiple accounts as a substitute for proper bookkeeping, but that’s not a good practice, says Meyer, who saw the pitfalls of this approach during his 23 years in banking operations.

“A lot of people had rental homes, and they had a separate account for each home, or they had an apartment building, and they had a separate account for each renter,” he says. “These are really people who just don’t understand how to do proper bookkeeping.”