How Many Bank Accounts Should You Have – And Why

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Have you ever wondered how many bank accounts you should have? This is a common question that many people think about, and the general answer is: It depends on your personal preference.

However, that said, in this post, I'll cover various reasons why you might want to have multiple bank accounts, how many you'll want, and the benefits.

One Checking Account and One Savings Account is Generally Enough

When it comes down to it, it's generally sufficient to have one checking account and one savings account. When you have one of each checking and savings accounts, you can better manage your money because you can separate your monthly expenses from your emergency fund and additional savings.

One of the best places to have a savings account is a high-yield online bank. My bank of choice is CIT Bank, where I have a Savings Builder account. It's great earning a solid interest rate every month, plus you get a higher interest rate each month that you save money by transferring cash to your account.

For a checking account, some people prefer to have a local bank so that they can deposit cash easily and have ready access to an ATM. Others prefer an online checking account, which may have more features or fewer fees than a traditional bank.

You can do both a local bank and an online bank if you prefer. I used to have a local bank just for depositing cash and then my Charles Schab checking account for everything else. I recently switched to 100% online and rarely work with cash anymore.

If you use my Charles Schwab referral link to open an account, you'll get up to $500, depending on how much you deposit when you fund your account. Schwab bank has amazing customer service, great online tools. If you open a brokerage account at the same time, you won't have to pay overdraft or low balance fees on your checking account.

Adding Additional Accounts

You might ask yourself, “When do I need to add more than two bank accounts?” This can depend on what your goals are. Some people like to open more than one savings account when they have multiple savings goals. As I mentioned earlier, I used two checking accounts so that I could use one for depositing cash and my other for all of my primary checking needs.

Make sure that if you have multiple bank accounts that you do not have to pay regular fees. Having to pay regular fees defeats the purpose of organizing your money as it hampers your ability to save regularly.

When to Add a Money Market Account

Money Market accounts and high-yield online savings accounts have similar interest rates, however, the two accounts work differently. When you're looking for the ability to write checks and have a slightly higher interest rate, a money market account can be beneficial. The drawback is that they often have a high minimum balance that you have to maintain to receive a decent APY.

When to Add Savings Accounts

A high interest savings account is excellent when you need to keep your money liquid and don't have or don't want to maintain a high balance. Some great examples for when to open an additional savings account include:

When to Open a Business Bank Account

If you own a business, you should separate your personal finances from your business finances, even if you're the sole proprietor. The best way to do this initially is to open a business checking account. I use an Axos Business Checking account for my business needs. For Axos Bank's basic business checking account, there are no monthly fees.

As your business grows, you may consider opening a business savings account as well. That way, you can have an account for your business's cash reserves, and you'll earn interest as well.

Benefits of Having Multiple Bank Accounts

There are several benefits to having multiple bank accounts. While having one checking account and one savings account is great for separating your money into savings and monthly living expenses, opening additional accounts can further help you reach your financial goals as I go over below.

Having Multiple Savings Goals

If you have multiple savings goals, you may consider opening separate accounts for each goal. Some common goals include saving for a down payment on a house, saving for a car or car down payment, and saving for next year's vacation.

Banks offer different types of savings accounts, so it makes sense to shop around. Some banks will offer higher APY, whereas other banks might be more accessible. When in doubt, open an online savings account such as a CIT Savings Builder Account. Online savings accounts often have up to 15 times the APY of a traditional brick-and-mortar bank's savings accounts.

Keep a Savings Reserve

Freelancers and part-time workers often have income that varies greatly week to week. To remedy this, it may make sense to pay yourself weekly from a cash reserve account. To do this, deposit your earnings into a savings account, and each week, attempt to pay yourself the same amount of money as if you were receiving a regular paycheck.

So, if you earn $1000 one week, $500 on week two, $1300 on week three, and $800 on week four, you've earned a total of $3600. Assuming this is a common theme for your earnings, you could then pay yourself $900 per week for the next four weeks as your earnings build up again in your cash reserve account. Simply adjust your regular paycheck if you need to, but do your best to pay yourself the same amount each week.

Better FDIC Insurance Over $250,000

FDIC insurance covers you for up to $250,000 per institution. If you have more than $250,000 in savings, you may want to open up multiple bank accounts in multiple banking institutions. That way, you can save more than $250,000 by spreading it across several banks.

This also protects you if one of your banks fails. It takes time to receive your check from the FDIC, and in the meantime, you'll have money in another bank that you can use for living expenses and other needs.

Different Perks at Different Banks

Every bank has its own set of perks. You may find that one bank has some perks that you like, but other banks have other perks for some of your other needs.

For example, Charles Schwab Bank provides excellent investment tools, and when you open a brokerage account with your checking account, your checking account minimum balance fees are waived. When I had an account with TD Bank, I could easily make a cash deposit, which I can't easily do with Schwab. You might find some banks give you bonus APY when you save more, such as with CIT Bank's Savings Builder account. 

When it comes down to it, not only might you have multiple bank accounts, but you might have multiple bank accounts at multiple banks.

When Not To Have Multiple Bank Accounts

Some people struggle to manage their finances, and if you have too many bank accounts, you might have a hard time keeping track of your money. You might miss a fraudulent charge, or you may end up paying a bill from two accounts by accident.

One way to help manage your finances better is to automate them. Check out this post on the best ways to automate your finances.

In general, if you have a tough time keeping your money organized, it might make sense to have fewer bank accounts. Additionally, if you're simply happy with how your money is set up as it is today, then you may not need to have more accounts than you already do.

How to Manage Multiple Bank Accounts

To manage multiple bank accounts, it pays to have a system in place. Using an app, for example, can help. I personally use Personal Capital to see where all of my money is. An app like Mint is a great alternative. With these two apps, you can see a snapshot of your money across all of your accounts in one place.

You'll want to document any of your automated finances, such as automatic transfers from one account to another. This way, you'll always know when money is going to be moved around. For example, I transfer money from my Schwab checking account to my CIT Bank savings account on the first of every month.

Does Having Too Many Bank Accounts Affect My Credit Score?

Having multiple bank accounts does not affect your credit score. Bank activity from your checking and savings accounts do not show up in your credit report. Instead, banks use a system called ChexSystems to track your history of overdrafts and other banking information.

Wrapping It Up

The bottom line is, most people will be fine with just one checking account and one savings account. With more than that, you may better be able to organize your finances and better protect yourself if a bank fails.

As I mentioned above, my wife and I use an online checking account with Charles Schwab, an online savings account with CIT Bank, and a business checking account with Axos Bank. These three banks are all great for what we use them for.

How many bank accounts do you have, and what do you use them for?

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