Youll Be Able To Draft A More Accurate Budget
Getting a clearer snapshot of how money moves in and out of your business will help you more accurately budget for regular or upcoming expenses than if you had to sift through hundreds of transactions in one account statement. For example, you might notice that your business monthly spend on equipment is reliably around the $2000 mark. Knowing this, you can better forecast for similar purchases in the future.
Get Different Perks From Different Banks
Every bank comes up with varying offers, interest rates, and balance requirements. You may find it better to open savings accounts at two or three banks so that you get the benefit of their interest rates and transaction perks.
For example, one institute might offer a lower fee on international transfers while another may come with a debit card that guarantees 1% cash back at every retail purchase. If you have varying needs, you could get multiple accounts to get as many benefits as you can.
Multiple Bank Accounts: Is Having More Better Or Worse
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With brick-and-mortar banks, credit unions, and online banks, the options for where to open an account are limitless now. You could open dozens of accounts in a day without much effort. But should you?
While theres no financial penalty for having many accounts, there are pros and cons to having many or having just one or two.
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Reasons You May Not Want Multiple Bank Accounts
Despite the various advantages, there are several reasons you may want to keep your savings in one place rather than in multiple accounts:
Hold A Savings Reserve
If you want to keep some money locked down for an emergency, you can put it into a liquid savings deposit that offers a reasonable return without penalizing you for early withdrawal. If you do have an emergency, you can get the money out without paying extra costs.
You can invest the rest of your money into long and short term deposits for generating income.
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How Credit Scores Work
Generally, your credit score is not directly tied to bank accounts. Regular bank activity will have little effect on your credit score because credit scores are based on data on your credit report.
Your credit report does not record information regarding your banking activity in the same manner that it keeps information on your , student loans, mortgages, and other debt obligations.
Taking a look at the FICO score, the most commonly used credit scoring model, you’ll see that banking activity is not relevant:
Traditional Banks Offer The Best Credit Cards
The largest traditional banks usually offer the best credit cards. American Express, Bank of America, Chase, Citi, Discover, and Wells Fargo all have great credit card offerings when it comes to rewards. However, if youre looking for a low APR credit card instead of rewards, major or local credit unions may have lower rates.
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Pro #: You Can Try Out A New Bank Before Cutting Ties With Your Current One
Switching banks isn’t an easy thing to do. In fact, in a recent study by The Ascent, more than 48% of consumers said they’re unlikely to switch to a new bank, even if they have reason to believe it would be a better fit. Opening multiple bank accounts, on the other hand, lets you try out a new bank while still enjoying the perks of your old one. That way, you’ll be in a better position to decide which is a better long-term fit for you.
Make Use Of Fdic Coverage
The FDIC offers investment coverage for each individual, per depositing institution. The maximum coverage provided is $250,000.
This means that if you have $500,000 and you invest all the money into a single savings account, then your investment will be at risk. If the banking institute goes bankrupt, then you will only be able to get your investment back for $250,000.
On the other hand, if you divide the savings and invest $250,000 into two separate savings accounts, you will be able to get coverage for all your investments.
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Is It Ok To Have Multiple Savings Accounts
Many nationally available online savings accounts do not require a minimum deposit amount, set a minimum balance or charge fees. Having multiple savings accounts for each of your savings goals is a good idea regardless of current interest rates, Kulak says.
Is having multiple bank accounts legal? The number of checking accounts any one person can have is entirely up to them. Theres no limit on the number of checking accounts you can open, whether you have them at traditional banks, credit unions or online banks. Is it bad to have multiple bank accounts with different
Knowing Your Banking Habits
A few weeks ago I wrote a column on saving money by knowing your banking habits. This same mindset applies to carrying multiple accounts.
If your banking habits allow you to open, monitor and manage multiple accounts, dont let this article convince you not to.
If you’re the average consumer trying to get your finances in order, fulfill your banking needs and avoid fees and fraud by sticking to a savings account and a checking account.
What do you think? Do you carry multiple accounts with no issues? Share your experience in the comment section.
Ask a Question
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One Bank Isnt Likely To Offer The Best Product In Each Category
If you want the best in class banking product in each product category, youre probably going to have to have accounts at multiple banks to make it happen.
Rarely will a single bank or credit union offer the best checking account, savings account, credit card, car loan and mortgage product. Instead, Bank A might have the best credit card while Credit Union B has the best car loan.
But where should you look for the best product in each class? Heres a general guideline.
Business Overseas Add An International Or Foreign Currency Account
International or foreign currency accounts are useful for a specific variety of clients. They are suitable for customers who need to travel abroad often for business or pleasure. Business professionals involved in international trade such as import/export or delivery of expert services overseas can also benefit from foreign currency accounts.
Regular bank accounts charge a fee for carrying out international or foreign currency transactions. The fee could range from 0.20% up to 5.00% of the transaction cost. A specialized international account charges 0% for foreign transactions. You can add an international or foreign currency account to your accounts portfolio based on your needs.
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Take Advantage Of Available Bonuses
One common strategy that banks use to draw in new customers is to offer bonuses to people who open new accounts. Usually, to earn a bonus from a savings account, you need to open an account and maintain a certain balance for a period of time. These bonuses can be worth hundreds of dollars, so theyre worth looking for if you have enough money to set aside.
Opening savings accounts at multiple banks gives you the opportunity to earn more than one of these bonuses. You can use the money you earn to accelerate your progress toward your savings goals.
Use Financial Tools To Improve Money Management
If you’re planning to use multiple bank accounts, consider using a budgeting tool like Mint or You Need a Budget to keep track of all of them more easily. These tools use direct import software to update all of your transactions in one place.
Additionally, consider using a to help keep track of your credit score. With Experian, for example, you’ll get free access to your Experian credit report, your FICO® Score and real-time alerts when certain changes are made to your report.
Tools like these make it easier to keep track of your finances without requiring a lot of time and effort on your part.
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Drawbacks Of Multiple Bank Accounts
- Minimum balance requirements: Some banks and credit unions require that you keep a certain amount in your account to keep the account open or to avoid a monthly fee. If you don’t have enough money to spread out across multiple accounts, it may not be worth the hassle.
- Fees: It’s possible to find several bank accounts that don’t charge monthly fees, but if you decide to choose banks or credit unions that charge them, it can get expensive fast.
- Organization: It’s important to stay organized if you have more than one bank account. It’ll be harder to keep track of your money if you have to log in to multiple online accounts to check your transactions. Forget about a recurring payment, for instance, and you may accidentally overdraw your account and get slapped with a fee.
You Get More Protection
When you deposit money into a savings account, as long as your bank is FDIC insured, you’re protected from losing money — up to $250,000 per depositor — if your bank were to go under. If you spread your savings out across multiple banks, you could get more protection.
Now to be fair, this isn’t a problem most people have. In fact, it may not be a good idea to have more than $250,000 in savings. If you’re really sitting on that much cash, investing some of it in a brokerage account may be a better bet. But if you have a specific reason for having that much money on hand — say, it’s earmarked for a home down payment but you just haven’t found the right house yet — then spreading it out across more than one bank could give you more security.
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Assess How Many Bank Accounts You Need
Consider these four factors as you think through the issue:
1.The right tool for the job
Bank accounts are financial tools. Theyre designed to accomplish different things. You probably need a checking account for frequent transactions like paying bills and withdrawing cash.
On top of that, you should have a separate account to accumulate savings.
If you want to maximize the interest you earn, you could open a certificate of deposit account or multiple accounts if you want to set up a CD ladder.
2.Keeping business and personal expenses separate
If you run your own business, or have regular business expenses, it makes sense to separate your business accounts from your personal accounts.
This can make deducting expenses easier at tax time and can help make it easier to evaluate the performance of your business activities.
3.Individual spouse accounts
Retirement accounts like IRAs are designed to have individual owners, so those need to be separate.
As for more day-to-day banking, it might be easier to keep track of your balances and transactions if you and your spouse have separate checking accounts.
4.Managing FDIC insurance coverage
Heres a nice problem to have: Youve accumulated so much savings that your bank account exceeds the $250,000 FDIC insurance maximum.
Since this ceiling applies to each account holder at a given bank, you can insure larger amounts of deposits if you spread your money among multiple banks.
For Earning Even More Interest: Certificates Of Deposit
If youâre interested in opening two business bank accounts or more, and one of your major goals is earning interest on money you donât need to access, then a business certificate of deposit might be a great option to consider. CDs offer higher interest rates than savings accounts in exchange for limitations on when you can withdraw your funds. Typically, the longer these terms are, the more money youâll make in interest. This can be a great way to take advantage of excess cash and earn a handsome return on the money youâve stashed away.
Bear in mind that there are downsides to CDs, however. Interest rates may increase during the term of your CD, which means youâre locked in at a lower rate until the CD ends. There are also penalties for early withdrawal, which means that you should avoid taking money from your CD until itâs time to renew the account. But if youâd rather lock in higher rates now, and know you wonât need to access the funds within, a CD can be another great option for boosting your companyâs cash.
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Pros: Why Have A Number Of Bank Accounts
To track different savings goals. You might want to use additional bank accounts for targeted savings goals. Keeping each savings goal separate makes it easier to manage and stay motivated.
To protect high balances. The Federal Deposit Insurance Corporation insures up to $250,000 per person, per account.
If you have a large amount of cash, you might use multiple financial products such as a certificate of deposit or money market accounts, each with balances under $250,000. Then all your money gets protected if your bank experiences hardship or closes.
To access money in case of a problem. You might not want all your eggs in one basket. If you cant access one bank account for some reason, having accounts at other banks can be a backup.
Its reassurance that you have access to cash if theres a problem at one of your financial institutions.
To get bank perks. Each bank or credit union offers different interest rates, fee structures, credit cards, and perks. You might open an account at each bank to take advantage of the perks each has to offer.
To take advantage of bank bonuses. Some banks offer promotional incentives for new customers. Many bonuses are a deposit into your new account after youve met the banks requirements.
Benefits Of Multiple Bank Accounts
- Different accounts for different purposes: While a checking account is great for everyday money management, it’s not as well-suited to saving for the future as a savings account. All savings accounts pay interest and only allow six withdrawals per month, making them better for parking your money but not a practical choice for everyday expenses.
- Higher interest rates: High-yield savings and money market accounts can offer higher interest rates than checking accounts and traditional savings accounts. If your bank or credit union doesn’t offer a high-yield savings product, it could make sense to open such an account with a different financial institution.
- Take advantage of different benefits: In some cases, it may make sense to have more than one checking account or savings account. That way, you can take advantage of the benefits each one provides without missing out on any of them.
- More FDIC insurance: The Federal Deposit Insurance Corporation insures up to $250,000 per bank, per depositor, per ownership category. If you’re in the fortunate position to have more than that in the bank, getting an account with another bank increases the total amount of insurance protection you receive. For example, keep $500,000 in one checking account and only half of it’s insured, but transfer half of it to a checking account with another bank, and the full amount is covered in the event that both banks fail.
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Meet Multiple Saving Goals
One of the main rationales for opening multiple savings accounts is to track the amount of money you can save for each individual savings goal. For instance, if you are looking to make the down payment for a new home, set money aside for next years vacation and keep some funds aside for an emergency, then you can open three separate savings accounts and deposit money into each of them.
This will help you organize your goals and reach them more easily letting you know how close you are to achieving each individual goal.