Should I have multiple bank accounts?

Separating the funds for your financial goals and spending into separate buckets may make them easier to manage. Having multiple bank accounts is one simple way to do that. This strategy may help you maximize your potential interest, reduce fees, stay organized, and give every dollar a clear job.

Here at Quontic, we like to say that we don’t mind if we’re your “side bank” or your main one. We get it: sometimes you’ve had an account somewhere else for a while (think checking account that all your streaming services bill from). Who wants the hassle of moving all of that over? The good news is you don’t have to if you don’t want to. With digital banking here to stay, you are empowered to have multiple accounts to fit your needs and seek out the interest rates and terms that are best for you and your financial future.

Should You Have Multiple Bank Accounts?

Opening multiple bank accounts may help you organize and manage your money with clear goals. But managing multiple accounts may come with both benefits and drawbacks. They could help you grow savings faster by maximizing your interest yield and keeping your savings out of sight. But it might also be tough to keep track of multiple accounts and their fees and requirements, especially if they’re at different banks.

Here are some other possible pros and cons of having multiple bank accounts.

Pros

• Maximize interest by choosing accounts with the best APY for each purpose.
• Let savings and emergency funds grow without the temptation to spend.
• Clearly see the progress on multiple financial goals.
• Know exactly how much you have to spend at any given time while staying on top of bills and building savings.

Cons

• Potential for multiple monthly service fees.
• Multiple balance and deposit requirements to maintain.
• Multiple balances to track if you’re spending from more than one account.

Tips to Manage Multiple Bank Accounts

Follow these tips to get the benefits of multiple bank accounts without dealing with the drawbacks.

Choose Accounts without Fees

Fees are one of the biggest concerns when choosing a bank account in general, and that concern is multiplied when you open more than one account. Even a small fee of a few dollars per month can become a lot of wasted money if you have to pay it on several accounts.

Look for bank accounts that don’t charge a monthly service fee, or at least those that waive the fee if you meet certain criteria, like a monthly deposit amount or balance. If you can, avoid having too many accounts with different requirements, because that can be hard to keep track of. Consider instead one savings account that won’t charge a fee as long as you meet a reasonable monthly balance requirement which you can meet. That should be easier to manage. Ideally, you won’t intend to pull from your savings too frequently, so keeping up with this should be simple.

It can be useful to avoid balance requirements for checking accounts. With the greater activity associated with checking accounts, you may run a greater risk of driving that account below the required balance due to the regular spending you’ll likely do out of an active checking account. 

Watch out for a direct deposit requirement for a bank account, too. If you do choose an account with that requirement, be sure your finances are structured so that happens automatically (say, through direct deposit of your paycheck), so you’ll be able to send a set, predictable amount of deposits each month. That way, you don’t have to worry about it over time.

Your best option, though, may be a bank account that doesn’t charge service fees in the first place. This hopefullyhelps you skip the surprise charges without adding any extra requirements to worry about.

Find Interest Rates in Line with Your Goals

Using multiple bank accounts may help you maximize the interest you earn, but it may be better if you use accounts in line with the purpose they’re designed for. For example, letting your savings languish in a low-interest checking account that’s meant for spending.

Look at the details of an account, and choose its purpose based on what it’s designed to help you achieve.

Here’s how you may might maximize your earned interest across multiple bank accounts:

• Open a high interest checking account for your everyday spending. You won’t likely hold a large balance in this account, but the high APY (annual percentage yield) can help you earn a little interest on any balance you do keep.
• Open a high-yield savings account (HYSA) for short- and medium-term savings goals, like for a home down payment, wedding, vacations, holidays and other big spending you’ll do within the next year or so. These accounts tend to come with limited withdrawals and no debit card, so it’s easier to let them grow without the temptation to spend from them early. You might want to open several HYSAs so you can dedicate each to a specific goal, like one for your annual vacation, one for holiday spending and one for rotating major goals like a wedding or down payment.
• Open a money market account for your emergency fund. These accounts blend the benefits of savings and checking: You get a high APY and limited withdrawals, but you get checks and, possibly, a debit card to access the funds quickly and easily.

Pay attention to the interest rates, restrictions and requirements of each account before you open and designate it for any purpose. For example, a HYSA for your everyday spending might not be optimal, because it may come with withdrawal limits or a balance requirement. Conversely, don’t let your medium-term savings sit in a low interest checking account when it could earn more interest in a high-yield savings account.

You Can Open Multiple Accounts at One Bank… or Go With More Than One Bank

Even if you choose to organize your savings plans with multiple savings accounts, you can keep your established account at another bank. Many of us started banking when walking into a branch was still a thing, so it’s natural to be hesitant to get rid of that old-standby (although, check your account’s fine print and make sure your money isn’t being eaten up by unnecessary fees). 

Name a Clear Purpose for Each Account

Be careful not to open multiple accounts just because different types of accounts are available to you. Make sure you know the purpose of each account, so you can fund it accordingly and use the money to meet your financial goals without getting derailed.

Here are some ideas for the types of accounts you might want to consider:

• Bill payments: Open a fee-free high-interest checking account for your recurring expenses. Deposit enough of your paycheck each month into this account to cover your planned bills, and schedule auto-pay with your providers if you can. If you’re working toward debt-payoff goals, include those funds in this account.
• Spending account: Open a second fee-free high-interest checking account for your discretionary spending, like groceries, clothing, entertainment and other miscellaneous spending. Keeping this separate from your bills and savings may make it easy to see exactly how much you can afford to spend at any time without missing bills or getting behind on your goals.
• Emergency fund: Open a money market account to hold emergency savings you can tap in case of unexpected medical costs, loss of income or other unplanned change in your financial circumstances.
• Holiday fund: If your family faces increased expenses around certain holidays or seasons each year, prepare for them with a sinking fund — that’s another name for a pool of money you build over time for a specific purpose. Save in a high-yield savings account, and move the funds to your spending account when holiday spending starts.
• Travel fund: If you travel or vacation frequently, prepare for the costs with a fund dedicated to travel in a high-yield savings account so that your money may grow while you plan your next big adventure.
• Life goals: Open a high-yield savings account you can use to prepare for life’s big milestones, like getting married, buying a home, or welcoming a child.

Split Your Paycheck Automatically

Oneway to make steady, easy progress toward your financial goals is to automate as much as you can. Set up systems to immediately split your income among your accounts to keep all your goals funded without thinking about it. You may be more likely to hit your savings goals if you automate them, rather than having to remember to make a conscious decision to transfer funds.

Automating may be easier if you receive a regular paycheck via direct deposit. Ask an HR rep about logging into your payroll account online to set the amount or percentage of each paycheck you’ll send into each account. Another option may be to log into your mobile banking to automatically set up these transfers.

If your pay fluctuates, aiming for percentages, rather than target amounts, to send to each account may be better. If you don’t always have money left over after bills and necessary spending, set a monthly date with yourself and/or your partner to check in on your balances and allocate whatever extra you find toward your financial goals.

So what’s the answer to “Should I have multiple bank accounts?

The answer, as with all things financial, is strictly up to you. People who want the simplicity of keeping all their goals separate while also maximizing their interest may do well with multiple accounts, each designated to a funding goal. If you’re looking to explore our high-yield savings accounts to see if this option is right for you, click here.