Your bank may charge you for closing a bank account. Know why
These days a lot of hue and cry is made by consumers about bank charges especially when it comes to monthly average balance maintenance charges. But do you know your bank also charges you when you close your account within a particular time period.
Generally, if the account is closed within a year, account closure charges are levied by the bank. These are known as bank account closing charges. Recently, SBI has revised its bank account closing charges. The new charges will be effective from October 1.
Now, for SBI customers, there will be no account closure charges in case a person closes the bank account after one year. Earlier the bank used to levy a charge of Rs 500 plus GST (goods and services tax) if a person closed its bank account even after a year of opening it. Those who close the bank account within one year of opening will have to pay Rs 500 plus GST. No change has been made for such customers. However, now no charges will be levied if a deceased person’s account is closed while earlier the bank used to charge Rs 500 plus GST in such cases. Also, no charge will be levied in case of account closure by basic savings bank account holder (no-frill account ) while earlier charges for it was Rs 500 plus GST.
However, the bank doesn’t charge anything if a person closes the bank account within 14 days of opening it. In case of current account, the charges are Rs 1,000 plus GST in case the account is closed after 14 days. Mostly, all other banks levy account closure charges and they range between Rs 500 to Rs 1,000 plus GST.”Many banks levy the account closing charges to recover the cost they incur while opening an account in terms of kits, cheque book, debit card, etc, says, ” Adhil Shetty, CEO and Co-founder, Bankbazaar.com.
Banks generally don’t charge anything if a person closes an account within 14 to 30 days of opening it. And also, there are no charges for closing the account after one year.
RBI guidelines on charges
The Reserve Bank of India has not given any specific guidelines on these charges and has left it to the discretion of the bank like most of the service charges. The RBI says that while fixing specific charges banks should ensure that charges are reasonable and are not out of the line with the average cost of providing these services.
Also, RBI has asked banks to ensure that customers with low volume of activities are not penalised, while fixing charges.
Why you should close multiple accounts
Despite the charges, it is always advisable not to hold multiple accounts. Most of the times when we change jobs we have to open a new account as companies have tie ups with different banks. But as you change job and as salary stops crediting to a particular account for a few months it converts into a savings account. All charges of savings account is levied on that account. You will also have to maintain a monthly average balance to avoid penalties. “It is always better to limit your bank accounts and maintain only those which are necessary. Most of the saving bank accounts are not free and come with costs like debit card fees, SMS alerts fees etc.
The more accounts you will have, the more you will have to pay for these charges every year,” says Adhil Shetty, CEO and Co-founder, Bankbazaar.com. “You earn an interest of around 4 per cent on saving bank account amount, which is much less than returns you would get while investing in mutual funds, PPF etc. Closing several bank accounts would also save your from the trouble of misuse as less number of accounts would mean a regular tracking of transactions. Lastly, small number of accounts would mean easy tax filing with less number of receipts and interest earnings to put in record,” he added.
Account closing process
Different banks follow different processes but broadly this is the procedure:-
1. Debit all the money that you have in your bank account
2 Approach your nearest branch and fill up the account closure form. The form ask for another bank account in order to transfer money before the account is closed.
3. In case your account is a dormant one, then you will have to first activate it to close it and submit the closure form.
4. The bank would ask you to surrender your debit card and unused cheque leaves, if any along with a duly signed letter or an application for closure of the account. Some banks also ask the user to destroy the debit card once the account has been closed.