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Should you close your old salary account after a job switch? Find out

Sahil Arora
old salary account, salary account vs savings account, salary account benefits, salary account interest rate, debit card offers, Minimum average balance

Salary accounts offer higher benefits than regular savings accounts without any minimum average balance (MAB) requirements. However, as the higher benefits are offered on the basis of the salary account, banks convert salary accounts into regular savings accounts when the employees quit their jobs. On conversion, the charges schedule and average monthly balance requirement of regular savings account comes into effect.

While it is better to close your old salary account after a job switch, there may be situations where carrying on with your existing salary account or converting it into a regular savings account would make more sense. Here are five factors to consider on whether to close or continue with your salary account after a job switch.

Salary account of your new job

Once you join a new job, check whether your new employer shares a salary account agreement with the same bank. If it is the same, continue with your previous salary account by informing your new employer about it instead of opening a new salary account with the same bank.

Additional savings bank account

If the salary account of your current employer is with a different bank, then you need to decide on the utility of having an additional savings account. If your previous salary account was your first savings account, you can choose to continue with the account and treat it as your primary savings account provided its features and service charges suit you.

While your salary account with the new employer can also perform the functions of a regular savings bank account, an additional savings account can be used as a primary account for making payments for investments or receiving funds from other sources. Making payments for your investments from your salary account might require changing your account details in existing mutual funds, loans, insurance premiums, etc., each time you change your job.

Minimum average balance

Most regular savings account requires account holders to maintain minimum average balance (MAB). Failing to adhere to the minimum average balance requirement can attract steep penalty in the form of balance non-maintenance charges . Moreover, many free transactions and services become chargeable on failing to maintain minimum average balance. Consider converting your salary account into regular savings account only when you are sure of maintaining the MAB requirement.

Transaction charges

Most of the customers usually tend to ignore the Schedule of Charges while opening a savings account. While a few transactions are chargeable outright, others have a pre-determined free limit beyond which they become chargeable. Savings accounts with higher MAB requirements waive off free limits or transaction charges.

Offers on debit card

Like credit cards, banks offer debit cards categories to suit varying needs. While some of them offer movie and dining discounts, cashback on select transactions, etc., others extend higher benefits on travel, fuel and utility spends. If your salary account s debit card matches your spending pattern and makes considerable savings for you, you can consider changing your salary account into regular or premium savings bank account.

While most banking services can be performed via internet banking or mobile apps, there are still some services like cash deposit and withdrawals, which can only be performed in the bank s branch or via ATMs. Similarly, most of the savings account charge cash withdrawals from other bank ATMs beyond the free limit. Hence, opt for account conversion if there is bank branch and ATM near your residence or office.

(The writer is business head, Payment Products,