How Many Bank Accounts Should You Have?

Banking

There is no rule as to how many bank accounts you should have. It all depends on your unique circumstances, lifestyle, and financial needs. The best way to figure out how many bank accounts you need is to understand the nuances between the many types of accounts out there.

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After reading this article, you’ll know how many bank accounts you need, and you can choose a setup that meets your financial goals.

While most people might feel they only need a checking and a savings account, there are several other kinds of bank accounts with various perks and benefits. On top of that, the rise of digital banking means there are many potential smart money moves to be made for the savvy consumer.

What types of bank accounts are there?

To help you decide how many bank accounts you need, we’ll run through some of the most common types of bank accounts available today. Understanding the differences between them, and their specific purpose, will make things much easier.

While having too many bank accounts can be overwhelming, different accounts can help you achieve different financial goals. It helps to be clear on your intent for each account you open, to avoid opening too many.

In this article, we’ll take a close look at:

  1. Checking accounts
  2. Savings accounts
  3. Money market accounts & cash management accounts
  4. Additional bank accounts

We’ll also run through the benefits of having multiple bank accounts, as well as some of the most common reasons for opening additional accounts. But first, let’s talk about checking accounts.

1. Checking Account

A checking account is the most basic kind of bank account available, and acts as the gateway to all of your financial management. The vast majority of people use a checking account to direct deposit their salary. Your checking account is also essential for making everyday purchases with a debit card, and can also make it easier for you to pay bills on time via automatic payments.

A standard checking account with a traditional brick and mortar bank or online bank is an essential for most people. Some prefer to have at least two checking accounts, to easily separate bills from nonessential purchases.

However, there are online banks which make it easier to organize your money through a single checking account. On top of that, some checking accounts will come with sign-up bonuses or other benefits.

In any case, a regular checking account is an essential part of financial management for most people. Whether you’re with a local bank or credit union, the bottom line for any good checking account is that it allows you to safely store and easily access your money on an everyday basis.

See also: Best Checking Accounts

Secondary Checking Accounts

If you’re a business owner, you might be wondering how many checking accounts you need. Separating personal and business finances can make both general accounting and taxes much easier if you’ve got a small-business. For this reason, many business owners will open a business checking account with the same bank or financial institution.

There are other reasons why you might want to have a second checking account. Many people open a separate checking account with an online bank to simplify money management.

2. Savings Accounts

In conjunction with checking accounts, savings accounts are often seen as an essential component of good financial management.

Savings accounts, as the name suggests, are designed to help you save money. Most checking accounts won’t earn interest, but a savings account will. Online banks offer savings accounts with much higher interest rates compared to traditional banks.

Whether you have access to a high yield savings account or an account with a regular interest rate, a savings account is the go-to place for those wanting to build an emergency fund.

Keep in mind that a savings account is designed to hold funds, so moving money out of a savings account can be both slow and costly. Many traditional savings accounts come with minimum deposits, and if you broach that figure you may be penalized.

Some consumers also prefer to use a savings account that is time-locked, to discourage them from dipping into it when their checking account runs low. Having a clear picture of your savings goals will be important when deciding which savings accounts you need.

See also: Best Savings Accounts

How many savings accounts should I have?

There’s no limit to the number of savings accounts you can open, in theory. While having multiple savings accounts can help you organize your savings and thus reach your goals faster, for most people one to two savings accounts is enough.

If you’ve got more than one pool of savings, it could make sense to open more than one savings account. For instance, you may have an emergency fund and a vacation fund, or a college fund for your children. In some cases couples living together might also want separate savings accounts.

No matter how many accounts you need, be sure to look for high yield savings accounts for the most competitive interest rates.

3. Money Market & Cash Management Accounts

A money market account is a deposit-based savings account. They are a kind of high yield savings account, designed for consumers who can meet higher deposit minimums in return for better interest rates. Money market accounts are a great option if you can afford a premium banking service.

A cash management account is similar, although they are technically not bank accounts at all. Rather, a cash management account is facilitated by brokers or investment-advisory firms.

They function as a kind of blend between a checking account and a high yield savings account, with more competitive savings rates and easier access to funds compared to a regular savings account.

See also: Best Money Market Accounts

How to Manage Multiple Bank Accounts

Managing multiple bank accounts might sound intimidating, but your finances could really benefit from being able to successfully navigate multiple accounts. From learning how to balance your spending, sticking to a budget and meeting savings goals, the same basic principles apply.

Let’s look at some best practices to help you manage multiple accounts without stress:

  • Budget for each card: If you’ve got multiple cards, credit or debit, it’s important to budget them individually. Also be sure to check that you’re using the right card to make your purchases.
  • Be consistent: Having multiple accounts shouldn’t be a license to drop your good financial habits. All of your accounts can work together to help you achieve your financial goals, and bad habits in one account can hurt your finances across the board.
  • Regularly review spending: It’s vital to regularly review all of your accounts, even more so compared to just having one bank account. If you’ve got a joint bank account, be sure to review it together with your banking partner, too.

Reasons to Open Additional Banks Accounts

There are many reasons why someone might want to hold multiple bank accounts. Below are some of the most common reasons:

Joint Accounts

Joint banks accounts are popular for couples who want to easily manage their shared expenses. Many couples will have both a joint account and individual separate accounts. This makes it easier to manage individual expenses in a separate bank account, while ensuring you still meet your financial goals as a couple.

New Account Benefits

Many people will open additional bank accounts to take advantage of the benefits, both short and long term. Some financial institutions will offer discounts and perks to new members, including more competitive loan rates or lower fees. You might also be able to earn cashback rewards simply for spending money, which is always a plus.

If you do consider opening a new account to take advantage of certain benefits, don’t forget to weigh the overall value of benefits against long-term fees and charges. You don’t want to overextend your personal finances in the long term for a relatively small, temporary benefit.

Easier Budgeting

Another reason for opening multiple accounts is to help track and budget your expenses. Some people like to have multiple bank accounts to separate their spending habits. For example, you might have one account for paying bills and other living expenses, one for saving, and another for non essential spending.

Additionally, those who are self-employed could use a business account to track their business expenses and business income for tax purposes.

In any case, using a separate account can make it easier to track your spending over time.

Fraud Protection

While most banks and financial institutions provide FDIC (federal deposit insurance corporation) insured accounts, this is generally only up to $250,000. For those with larger savings, spreading your assets across multiple bank accounts can help protect more of your funds in the event of loss.

In addition, having even two bank accounts can be a good way to protect yourself from financial fraud. The chances of two accounts being compromised in one attack are low. This ensures you’ll still have access to some funds and banking services while a fraud case plays out with your bank.

Pros of Multiple Bank Accounts

In theory, having numerous bank accounts can make your money work harder for you. Below are some primary benefits of having multiple accounts:

  • Access to higher interest rates: While you might want to hold on to your traditional bank account, opening another can help you access higher interest rates offered by online banks.
  • Focused savings accounts: It can be easier to manage and meet your savings goals by opening one or more online savings accounts.
  • Greater liquidity: Online checking accounts or cash management accounts offer the benefit of easy access to funds as well as more competitive interest rates and benefits.

Cons of Multiple Bank Accounts

While the benefits of multiple bank accounts are real for some, having more than one bank account isn’t the right choice for everyone. As helpful as it can be, there are also potential downsides:

  • More work: Keeping track of your expenses and maintaining a budget with multiple accounts means more work to reconcile your finances.
  • Minimum balances: A lot of bank accounts come with minimum balance requirements, especially savings accounts. The more open accounts you have, the more you’ll need to meet these requirements.
  • Risk of higher fee costs: While many online banks are no-fee, you’re still likely to pay more in banking fees if you’ve got multiple accounts.

Frequently Asked Questions

Can you have too many bank accounts?

It is totally possible to have too many accounts. The best indicator that you’ve got too many bank accounts is if you’re struggling to manage them and responsibly track your spending. The whole point of having additional accounts is to improve your finances long term, but if you’re feeling stressed about keeping them straight, then you’ve probably got too many.

Remember that the more accounts you have, the more you’ll have to pay in fees, too. You might be able to reduce your exposure to fees by setting up an online checking account, or using the same financial institution for more than one account.

Is having more than one bank account bad for my credit?

No. Having more than one account shouldn’t have any effect on your credit score. Your credit score is calculated from several aspects of your credit report. However, opening a bank account isn’t the same as opening a line of credit, which will affect your credit score.

Is it smart to have four bank accounts?

Having four bank accounts is a little unusual, but if it works for you and your money then why not? There’s no template for a smart number of bank accounts. It all depends on what you need, and how much you can manage.

Bottom Line

So, how many bank accounts should you have? The answer really depends on your unique circumstances. If you enjoy managing your finances and like to research personal finance options, then having multiple bank accounts could work for you.

Whether you’re interested in retirement accounts, a money market account, or simply avoiding excessive overdraft fees, additional accounts with a credit union or other financial institution can be beneficial.

Steven Brennan
Meet the author

Steven Brennan is a freelance writer specializing in finance and cryptocurrency. He has an MA in Literature from Maynooth University in Ireland, and lives in the Pacific Northwest with his wife and young daughter.