Should I Have Multiple Bank Accounts?

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Most people start their banking journey with a checking account and sometimes a savings account. It's a good idea to have both so you can separate saving for your financial goals from your everyday spending. But in some cases, it may make sense to have more accounts than that.

Here's what to know about having multiple bank accounts and why you should consider it.

Types of Bank Accounts

Here are the different types of bank accounts you can have:

  • Checking account: This is a standard bank account that you can use for everyday money management. You can pay bills, write checks, receive direct deposits and make purchases using your debit card. Checking accounts typically don't offer interest, but some do.
  • Savings account: A standard savings account doesn't offer a high interest rate, but it can be a great place to stash your emergency savings, as well as savings for short-term financial goals.
  • High-yield savings account: A high-yield savings account provides the same safety and liquidity as a standard savings account, but it offers a higher interest rate.
  • Money market account: Money market accounts act as a hybrid between a checking account and a savings account. You can often get a higher interest rate than a standard checking or savings account with a money market account, and you'll also get the ability to write checks and sometimes even use a debit card tied to the account.
  • Certificate of deposit: A certificate of deposit, or CD for short, often offers a high interest rate in exchange for committing your funds for a set period, which can range from a few months to several years. They don't always offer higher rates than high-yield savings accounts, though, and many charge fees if you withdraw your money before the account's maturity date.

Be aware, though, that your bank may not offer all of these types of accounts. For example, some large institutions do not currently offer high-yield savings accounts.

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 (though currently at very low rates) 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 (FDIC) 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.

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.

How Many Bank Accounts Should You Have?

Having multiple bank accounts can be beneficial, but how many you decide to have depends on your situation and goals. At the very minimum, it's a good idea to have at least one checking and one savings account.

Beyond that, consider your money management goals. If you have several short-term savings goals, such as building an emergency fund and saving for a down payment on a house, consider opening a savings account for each one to make it easier to track your progress.

If you like the benefits that a particular online checking account provides but you also want to be able to make cash deposits, you may be out of luck since many online banks don't offer that option. Getting an additional account with a traditional bank or credit union can give you that ability.

Take your time to consider your situation, your preferences and your goals to determine how many bank accounts are right for you.

Do Bank Accounts Impact Your Credit Score?

In general, bank accounts don't affect your credit score, and they don't show up on your credit report. One exception is a charged-off account: If you have a negative balance on a checking account and never pay back what you owe, the bank may report it to the credit reporting agencies.

Your bank accounts do show up on your ChexSystems report, which is a consumer report for your banking activity. Banks and credit unions will review your ChexSystems report when you apply for a bank account, and if you've had negative items on past accounts, it can make it difficult to get approved for a new one.

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 credit monitoring service 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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