When it comes to bank accounts, is too much of a good thing too much?
Should you have more than one or two bank accounts? And should they be at different banks?
The more bank accounts you have, the more time it takes to track and manage them.
But there are advantages to having multiple accounts. Read on to decide if having more than one bank account can be useful for you.
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How many bank accounts should I have?
It’s an excellent idea for most people to have at least two bank accounts: a checking and savings account. And when you link your savings account to your checking account, transfers are a piece of cake.
To keep things simple, you might want checking and savings accounts at the same bank.
Linked accounts with one routing number make managing your money easier. And some banks offer overdraft protection and cover a checking shortage with funds from your connected savings account.
Yet, there are some reasons you might want multiple accounts (perhaps at different institutions).
Below are a few of those reasons:
- You want a checking or savings account separate from the joint account with your partner.
- You’re self-employed and need a business account separate from your personal funds.
- You want to take advantage of the perks offered by different banks.
- You don’t want to have all your money in one bank.
The Pros and Cons of Owning More Banking Accounts
Let’s look at the pros and cons of having multiple accounts, so you can decide if it’s right for you.
Pros: Why have a number of bank accounts
To track different savings goals. You might want to use multiple bank accounts for targeted savings goals. Keeping each savings goal separate makes it easier to manage and stay motivated.
For example, if you're saving for a house down payment and vacation, you can have savings accounts for each. And you might want to have a separate account for your emergency savings too.
To protect high balances. The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per person, per account.
If you have large balances, you can have multiple bank 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 can’t access one bank account for some reason, having accounts at other banks can be a backup.
It’s reassurance that you have access to cash if there’s a problem at one bank.
To get bank perks. Each bank offers different interest rates, fee structures, and perks.
For example, one bank might offer a higher interest rate, and another has free ATM withdrawals. 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 you've met the bank's requirements.
Each bank has different rules to qualify for a reward. For example, some require direct deposits of a specific dollar amount. And others have a set number of debit card transactions.
Cons: Why have fewer accounts
Managing multiple accounts takes time. You have to track account numbers, fees, interest rates, and debit cards for each account.
No matter how organized you are, when you have several bank accounts, it takes time to keep track of them. It’s also wise to keep an eye on each one to ensure there are no unauthorized transactions.
It’s challenging to maintain minimum balances. Some bank accounts have a minimum balance. And many will charge fees if your account falls below that balance.
It's not always easy to sustain multiple minimum balances.
You could pay more fees. Even accounts that don't have fees at first can change the rules. If you don't stay up-to-date with costs and rates, or if you fail to maintain minimum balances, you could lose money.
Some banks pull your credit when you open an account. Find out if the bank pulls credit before opening an account. If so, ask whether it will be a soft or hard pull.
A soft pull won't affect your credit. But a hard pull gets listed on your credit report and can impact your credit score.
You can get flagged as a risk. Some banks review your banking history when you apply for a new account.
If they determine you have too many bank accounts, they might flag you as high risk. When this happens, it can affect your interest rates and ability to get credit.
Managing Multiple Accounts
If you think having multiple bank accounts is right for you, it’s wise to have a system for managing your accounts.
You need to know what you have, how much, and where. Keep up-to-date on the fee structures, restrictions, and requirements for each bank account.
Do what works for you to stay organized! Here are some ideas for managing multiple bank accounts:
- Use a spreadsheet. Track each bank account's specifics. Note the interest rates, minimum balances, fees, and transaction limits.
- Use a finance app. Finance apps, like Personal Capital, help you see all your accounts and balances in one place.
- Automate everything. This way, you don’t have to rely on your memory to make transfers, deposits, and withdrawals.
Should you have multiple bank accounts?
The short answer is yes. Most people do well with a checking and savings account. You might also choose to have a bank account separate from a joint account with your partner.
And, if you’re self-employed, it’s smart and probably necessary to have a business account too.
Beyond that, for some, more isn’t better. It comes down to a matter of preference – and how organized you are.
But no matter whether you have two accounts or ten, you need to track them all.
Fortunately, there are plenty of apps and budgeting software to help you with that, including some of our faves Personal Capital and Tiller Money.
Having multiple bank accounts might further your goals and be just what you need to manage your sinking funds.
Just make sure you're not missing out on improved earnings or lower fees with fewer ones.
Article written by Amanda
Amanda is a team member of Women Who Money and the founder and blogger behind Why We Money where she writes about happiness, values, and money.
