You should always be in the know about suitably closing out loan and savings accounts at banks. There are procedures that have to be followed in both cases to minimize future hassles and anxiety on your part, not to mention costs in some cases. Let’s first come to closing out savings accounts in your bank.
Did you know that banks will charge your closing your account within a stipulated period of time? Chances are, probably not. In case the account is closed within a year’s time, in most cases, banks will impose charges for account closure. For instance, SBI used to charge Rs. 500 + GST earlier for closing bank accounts even after a year of opening. Now, however, there are no account closure charges in case the account is closed after a year. The charge of Rs. 500 remains applicable in case the person opening the account closes it before the conclusion of one year. No charges are levied in case of closure of the account of a deceased individual and also in case of basic savings account holders.
In case of SBI, it does not charge any fees in case the bank account is closed within 14 days of being opened. The charges are Rs. 1,000 + GST in case of current account closure post 14 days. Most banks have charges between Rs. 500-1,000 in such cases as per reports. These are imposed as recovery for costs incurred by banks while opening the account which includes welcome its, debit cards, cheque books and so on. Post one year, there are no charges levied by banks.
Many people close out unnecessary bank accounts, i.e. if they have multiple accounts. Closing multiple accounts is highly recommended. Many a time when people change their jobs, they have to open new accounts since companies usually have tie-ups with various banks for salary credit purposes. Yet, once salary stops being sent to a particular account, it stays idle as a savings bank account with all charges levied accordingly. You also have to maintain your monthly average balance in order to avoid paying any penalties. You should thus maintain only those bank accounts which are necessary and close out the other ones. Most savings bank accounts do not come free of cost and will have charges like the debit card fee, fees for SMS alerts and so on.
Having a lesser number of accounts also directly equates to easier filing of taxes since you will not have to note a large number of transactions, interest earnings and receipts while you can also invest the money kept idle in multiple accounts elsewhere to earn better returns since savings accounts only offer between 3.5-4% as interest.
Process for closing savings accounts
- Always debit the money that you possess in the account that you are about to close.
- Go to your nearest branch and ask for the account closure form. Fill this up and cover the part where another bank account is asked for in order to transfer money prior to closure of the account in question.
- In case you have a dormant account, you will have to activate the same first for closure and then submit the form accordingly.
- The bank will ask you to surrender the unused cheque leaves and the debit card along with the duly signed application/letter for closing out the account. Some banks may ask customers to destroy their debit cards upon closure of the account.
Closing out loan accounts
It’s not just savings accounts; you have to be informed about the steps to be followed while closing loan accounts as well. Here are some of the key aspects to be followed in this regard:
- Original Documents- You should always make sure that you get back all your original loan documents which were hitherto with the lender. The bank should return all documents, title deeds for mortgaged property and securities within 15 working days of repayment of dues as per the contract. You are also entitled to compensation for any delay exceeding 15 working days and in case documents are lost/misplaced.
- Lifting Fees- For home loans, the lender will naturally have a mortgage on the property in question. This charge should be lifted and your property should be freed of the same in writing upon loan repayment. In case you have other credit facilities from the bank, it will not provide documents until you clear all dues.
- No Dues Letter- This is a highly crucial document and you should get the No Dues certificate from your bank while closing your loan account. This will help you keep your credit score in better shape
- Loan Account Statements- Get the loan account statement which displays ZERO in the closing balance section.
- Credit Report/History- Obtain a credit report copy around one month after obtaining closing documents. Ensure that the closure of the loan is suitably reflected in your credit report. In case this is not reflected suitably, you should get the issue resolved without any delays. In case you have reached a settlement with the lender without clearing the full dues, this will be shown as a default on your credit report.
- Home insurance- Get your home insurance policy reassigned in your name after closing the loan account. This policy will initially be in the name of the bank. You can then renew or discontinue the policy altogether on the due date and transfer to another insurer in case you get more benefits
- Collateral- In case you have given your life insurance policy or other securities to the bank including FDs, NSC and so on, make sure that these are lifted and freed upon closure of the loan.
- Guarantors- In case you have had guarantors for your home loan, you should thank them appropriately while closing your loan account. Also make sure that you provide a copy of the final closure statement which frees them entirely from any responsibility/liability in this regard.