As a self-professed personal finance junkie, I often run into a problem with opening too many bank accounts and other financial accounts. There are several reasons I do this. It’s partly because I like to optimize my accounts by decreasing fees, earning higher interest rates, or adding new features. And sometimes I open new accounts for sign up bonuses. Some bank bonuses and credit card bonuses can be worth several hundred dollars each, which is tempting!
Every few months I need to reign things in and review my accounts to make sure I don’t have too many open and unused accounts. That is one reason I maintain a list of my financial accounts and balances. It helps me track my net worth, and stay on track. It’s also good to share with my wife, so she has a good overview of our finances.
I recently decided I had too many open accounts, and I’m working on simplifying my finances, yet again.
And this leads me to the question – how many bank accounts do you need?
This seems like a simple question, and it is on the surface. But as your situation changes, you may find a benefit in opening another bank account to help manage your finances, provide a buffer from other accounts, or serve as your main financial hub.
Let’s take a quick look:
How Many Bank Accounts Do You Need?
The Minimum Banking Setup
At the minimum, most people need a checking account. There are usually no limits on the number of transactions you can make through a checking account. Savings accounts usually limit the number of transactions to six per month. So you should run your normal spending through your checking account.
Unfortunately, most checking accounts don’t offer much in the way of interest*. So many people are better off keeping the minimum amount of money to cover their spending in their checking account, and using a savings account to earn higher interest rates.
*A Note About Interest Bearing Checking Accounts: Some checking accounts offer decent interest rates. Some of them make you jump through hoops to get the higher interest rates, or place caps on the balance that earns a higher interest rate.
A notable exception is the Radius Hybrid Checking account, which currently pays 0.85% on balances over $2,500. This is a very high interest rate for a checking account and allows users to simplify their banking by not needing to open an additional savings account if they don’t want to.
Radius Bank also offers the following features:
- Earns 0.85% APY on balances over $2,500
- Free ATMs Worldwide
- No monthly maintenance fees
- No minimum balance requirements
- Free Online & Mobile Banking with:
- Mobile Check Deposit
- Personal Financial Management tools
- P2P payments
- Free first order of checks
- Open online in 5 minutes or less
- Use with Mobile Wallets
- Read our Radius Hybrid Checking Review for More Info
Verdict: At the minimum you need a free checking account. If simplification is your goal and you only want to maintain one bank account, then go for an interest-bearing checking account, such as the Radius Hybrid Checking Account.
Checking Account Plus a Savings Account – The Most Common Banking Setup
Having a checking account is the bare minimum. But I also recommend having a savings account so you can earn more interest on your savings. You can almost always maintain both accounts at one bank. However, you want to make sure that your savings account is earning a good interest rate. You can compare our list of highest online interest rates to see how your current savings account compares.
In most cases, the best interest rates are found at online savings accounts that can avoid the overheard that many brick and mortar banks have.
Using Multiple Bank Accounts to Separate Spending and Savings
This is another common banking setup, and one that I employ. I run the majority of my spending through one bank, which acts as my main financial hub. I have all my payroll and other direct deposits go to USAA. I also use it for all my spending. I actually use cash rewards credit cards for most daily spending, and have the full amount automatically debited from my checking account each month.
I keep enough money in my checking account to cover about 2 months of bills. The rest of my savings is kept in an online savings account where it earns more interest than I would earn at USAA.
If I really wanted to simplify things, I could probably change my bank account to the online bank. But I have been a USAA member for over 15 years now, and we also use them for insurance and other needs. So this setup works well for now.
The Benefit of Separating Spending Money from Savings
The other reason I haven’t closed my USAA account is because like having my spending money and savings separate. I use my online bank for my emergency fund and for long term savings. Keeping these accounts separate gives me an immediate sense of how much I have available in my spending account. If I’m running low, I can simply transfer from my long-term savings. If the balance is high, I transfer to savings.
If my online savings account balance gets high (a good problem to have!), then I know it’s time to transfer some money to my brokerage account where I can invest the funds in a taxable account.
I recommend creating some business rules for your banking to help you know when to make transfers. It eliminates guess work and simplifies decision making. You can add some brief language in your Investment Policy Statement if you find it helpful.
When Does it Make Sense (or Cents!) to Open a New Bank Account?
As I mentioned above, I’m a bit of a personal finance junkie, so I’ve been guilty of chasing shiny objects and lucrative sign up bonuses. But I don’t just open an account for the sake of opening an account. I only do so if the sign up bonus is very large, and/or I will use the new account and close an old one.
Here are some times when it makes sense to open a new financial account:
Opening a New Bank Account to Avoid Fees
This is one of the best reasons to open a new bank account. Many banks now offer free checking accounts, with no minimum balance and no monthly fees. This is what you should go for at the minimum. While you are at it, you should also check to make sure you aren’t paying any other unnecessary fees, such as ATM fees, money transfer fees, or other avoidable transaction fees.
Opening a New Bank Account for Added Features
The banking industry has witnessed a lot of innovation in recent years. This includes mobile banking and mobile check deposits, the ability to open sub accounts, peer to peer payment systems, mobile wallets, free ATM use or ATM Reimbursements, and a host of financial management and budgeting tools.
Many banks are also merging with other institutions in order to add features. This happened with the Ally Bank acquisition of TradeKing. The new investment platform is now known as Ally Invest, and it can be linked directly to an Ally Bank account. This is a great way to keep people in their ecosystem.
And, of course, we also mentioned the Radius Hybrid Checking account, which combines a host of features in one easy to use account. Opening this account can make it easy to consolidate your banking accounts down to one if you so desire.
Opening a New Bank Account for a Sign Up Bonus
In this case, I generally won’t open a new bank account for a sign up bonus unless it is worth several hundred dollars. I won’t open a new account for only $50 – $100. But I will give it strong consideration for an account such as the Chase Bank Coupon, which is currently worth several hundred dollars for opening a new account. You have to make your own decisions regarding when it’s worth opening a new account for the sign up bonus. If you try, you can easily make a anywhere from a few hundred dollars to a few thousand dollars every year by opening new bank accounts.
Should You Chase Rates?
I’m not much of a rate chaser. I do want to make sure my savings account offers a competitive interest rate, but I don’t typically move my savings to a new bank account unless the yield is substantially higher. I don’t have a firm number for this. I just look at the amount I normally keep in my savings account and make sure opening a new account will provide at least a couple hundred additional dollars of interest over the course of a year compared to the current account.
I also usually wait a month or two before deciding to open a new account simply based on interest rates. The top online savings accounts are all generally very competitive and keep their interest rates within a few basis points of each other. And when one bank increases its interest rates, other banks are soon to follow.
Note: Chasing CD Rates may pay off. There is more variance in CD Rates compared to interest rates for savings accounts. You can often find more attractive CD Rates by shopping around.
A Few Word on Opening and Closing Bank Accounts
Some banks do a hard credit check when you apply to open an account. So keep that in mind in case you will be applying for a loan or credit card in the near future. You should definitely wait until after a major purchase, such as a mortgage application. This does not apply if the bank account you are considering opening only does a soft credit pull.
Changing bank accounts can be a lot of work. I covered this in greater detail, including the steps you should take when switching bank accounts. That article shows you how to research your banking needs, find the best bank for your situation, and how to successfully open a new account and close your old account without missing a beat.
What do you think is the ideal number of bank accounts? How many bank accounts do you have?
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