The average American has around five bank accounts of varying types, according to data from Payments Journal. You may need multiple bank accounts if you want to build up your savings or keep your bank activity separate from one account to the next. But too many checking accounts can make managing your finances difficult. You also might have to pay bank fees on each of your accounts, which can add up quickly.
With too many bank accounts, your deposits and your withdrawals will affect a wide array of accounts, meaning you need to stay on top of your balances so your checks don’t bounce as well. Can you have too many bank accounts?
Checking accounts vs. savings account
Checking accounts give you easy access to your funds. You can pay your bills or withdraw your funds by writing checks and using a debit card either directly or via an ATM.
Savings accounts serve a different purpose because they are designed to hold funds for longer periods of time, hence the savings part of the name. Savings accounts also typically pay a higher interest rate.
You will often have limited access to the funds in your savings account, but you can typically link your savings and checking accounts so that you can transfer funds between the two.
How many checking accounts can you have?
There is no limit to the number of checking accounts you can have. But it’s a good idea to limit the number of accounts to an amount that you can reasonably and sustainably manage.
Too many checking accounts can make it harder to track deposits and withdrawals. When you have too many accounts, bank fees can quickly add up as well.
Reasons for multiple checking accounts
You probably wouldn’t start opening checking accounts left, right, and center, but sometimes, it might make sense to have multiple checking accounts. Here are a few reasons you might open more than one checking account.
1. Keeping certain deposits or withdrawals separate
Keeping funds separate can be tricky if you use only one checking account for your deposits and your bills. Multiple checking accounts prevent funds from getting mixed up or confused with one another.
For example, if you are self-employed, opening a separate checking account can help you keep your business activity separate from your personal transactions. So, as you can see, there are instances in which separate accounts make total sense.
2. You’re aiming to take advantage of certain banking perks
Banks frequently offer bonuses or incentives to people who open a new checking account. You might be able to obtain a lower rate on a loan or enjoy a higher interest rate on your savings account when you open a new account.
If the pros outweigh the cons, it may be worth opening another checking account. Pay close attention to what the perks entail before you commit to them and open a new account.
3. Transferring funds between different accounts
Online checking accounts make it easy to bank remotely. You can pay your bills and make deposits from your phone or computer.
You can withdraw cash at an ATM with a debit card or make deposits at a brick-and-mortar bank. And if you link both checking accounts together, you can easily transfer funds.
4. Maximizing FDIC coverage
Boosting your Federal Deposit Insurance Corp. (FDIC) coverage is another solid reason to think about having more than one checking account. The FDIC makes sure your money is safe in banks. It’s like having an insurance policy for your hard-earned cash in case your bank takes a nosedive.
As of 2023, the FDIC has your back for up to $250,000 per depositor, per bank. But if you have more than $250,000 in one checking account, you might be leaving some of your money vulnerable if that bank goes belly up.
When you divvy up your money across different banks, you’re essentially upping your insurance coverage game. It’s kind of like diversifying your financial portfolio. Say you’ve got $500,000 stashed away, and you split it between two checking accounts at two different FDIC-backed banks. Each of those accounts is covered up to $250,000 so your full $500,000 is safe.
Advantages and disadvantages of having multiple checking accounts
Although there are valid reasons for having multiple checking accounts, it’s important to know the pros and cons to really decide whether it’s a good idea.
Pros
- Enhanced FDIC coverage: Having multiple checking accounts allows you to maximize your FDIC coverage, ensuring that more of your deposits are protected in case of a bank failure.
- Improved financial organization: Multiple accounts can help you keep different aspects of your financial life separate and well-organized. For instance, you can use one account for bills, another for savings, and a separate one for business transactions, making it easier to track your finances.
- Banking perks and benefits: You can take advantage of various banking perks, such as bonuses, higher interest rates, or lower loan rates, by opening multiple accounts. This can potentially save you money and increase your overall financial gains.
- Budgeting and expense control: With multiple accounts, you can allocate specific amounts for various expenses or goals, making it easier to budget and control your spending.
- Convenient fund transfers: Multiple accounts can simplify fund transfers between different banks or institutions, allowing you to move money where it’s needed quickly and efficiently.
Cons
- Increased maintenance: Each checking account may come with its own set of fees and minimum balance requirements. Managing multiple accounts can be time-consuming, and fees can eat into your overall savings.
- Overlooked balances: With several accounts to monitor, there’s a higher chance of neglecting or forgetting about one account, potentially leading to overdrafts or missed opportunities for managing your money effectively.
- Difficulty in tracking transactions: Keeping tabs on multiple accounts’ transactions can become confusing, making it challenging to maintain a clear picture of your financial activity.
- Risk of overextending: Having multiple accounts can make it easier to accumulate debt or overspend if you’re not careful because you may have a false sense of financial security resulting from the presence of multiple accounts.
- Account closure hassles: Closing an account can be more complicated when you have multiple accounts, as you need to ensure all automatic payments and direct deposits are redirected to the remaining accounts.
What to look for in banking accounts
Switching banks is not a frequent or common occurrence, so it’s important to choose an account wisely because it is essentially a long-lasting tie between you and the bank. Here’s what you should consider when looking for a bank you can trust with your new checking account.
1. Low fees
Nothing is more frustrating than being hit with fees when it comes to your own money. Bank fees can eat away at your balance, which is never a fun experience. But some banks charge little to no fees as a way of enticing customers to open an account with the bank. To keep more money in your account, look for banks that offer free checking accounts without monthly maintenance fees.
2. Low minimum balance requirements
The bank may require a minimum balance in your account to avoid fees. But if this is your first bank account or you find yourself strapped for cash regularly, these fees can be costly. A bank account with no minimum balance requirement gives you the most flexibility.
3. Large ATM network
ATMs make it easy to get cash when you need it. You’ll avoid having to pay fees when you withdraw your money from an ATM associated with your bank or a bank in your bank’s network. In most cases, if you go outside of your network, you can usually expect to pay a fee.
If you need to use an ATM, finding a bank with an extensive network of free ATM options can save you money by preventing you from having to pay unnecessary fees. Alternatively, you can choose a bank that reimburses customers for part or all of the fees associated with out-of-network ATM withdrawals.
4. Good interest and banking perks
Some banks reward their customers with higher interest rates. You may need to carry a higher balance in your bank account to really benefit from these interest rates.
If keeping more money in your account does not cause you financial strain, the higher rate can earn you extra money. Many bank accounts come with various other benefits that can save you money as well.
You can find checking accounts that will refund your ATM fees or offer cash rewards. To take advantage of these perks, you might be required to use your debit card, set up your paychecks so that they are directly deposited, or use the bank’s mobile app.
MoneyLion offers a convenient marketplace to compare high-yield savings accounts from our trusted partners that could help grow your money.
5. Mobile banking
With online access, you can track your accounts from anywhere in the world. If you prefer to bank from the comfort of your home, open an account with a bank that offers robust online platforms and mobile apps. That way, you can make deposits, pay your bills, and transfer funds without ever having to leave your home.
6. Accessibility
Choose banks that make it easy for you to open accounts with them. If you prefer to handle your accounts remotely, select a bank that has features you can manage online or from anywhere via its app. That said, if you like having a bank close by, consider opening your accounts at a local bank instead.
7. Transparency
When you open a bank account, you should know which fees you are responsible for and how much the fees amount to as well as how you can go about handling any and all disputes. With certain bank accounts, you might have to seek out this information on your own, and skimming through lengthy documents can be frustrating.
Other banks will clearly post this information on their websites. To protect your money, choose a bank that makes it easy for you to understand the fees you can expect to be charged.
Finding your perfect balance
The number of bank accounts you need depends on your personal preferences. In many cases, multiple bank accounts can help you achieve your financial goals.
But too many bank accounts can be difficult as it could be hard for you to manage multiple accounts at once. You could have checks that bounce and end up having to pay more in bank fees than necessary. Before you open another account, make sure this is the right choice for you and your finances.
FAQ
Can I open multiple bank accounts with the same bank?
Yes, you can generally open multiple bank accounts with the same bank. Most banks allow customers to have multiple accounts, including checking accounts, savings accounts, and specialized accounts like money market accounts or certificates of deposit (CDs). But there may be limits imposed by the bank on the number and types of accounts you can open, so it’s a good idea to check with your bank for its policies and fees.
Can having too many bank accounts hurt my credit score?
No, simply having multiple bank accounts generally does not impact your credit score. Bank accounts are not reported to credit bureaus, and your credit score is primarily influenced by your credit history, including factors like credit card use, loan repayments, and the length of your credit history.
Will having multiple bank accounts increase my financial security?
Having multiple bank accounts can contribute to your financial security in some ways. It allows you to better organize and manage your finances by separating funds for different purposes, such as a checking account for everyday expenses and a savings account for emergencies or long-term goals.
