How many checking accounts should you have? The answer depends on your financial needs. For some people, one checking account might be enough. But for others, such as those who want to designate different buckets of money for different purposes, at least two checking accounts might be in order.
Geri Hopkins, chief operations officer at Skyla Federal Credit Union, says you should open multiple checking accounts if you have a more hands-on financial management style. “While it offers numerous advantages in terms of organization safety and benefit maximization, it also demands a higher level of financial discipline and management,” she says. “Like any financial decision, it’s about weighing the benefits against potential complications and choosing what best supports your financial well-being.”
Is There a Maximum Number of Checking Accounts?
Technically, there’s no limit on the number of checking accounts you can have. However, a bank might limit the number of checking and savings accounts you can open there.
Pay Attention to Insurance Coverage Limits
Whether you’re opening one checking account or several checking accounts, be mindful of insurance coverage limits for your money.
The Federal Deposit Insurance Corp. insures your bank deposits in the event of a bank failure, while the National Credit Union Administration similarly insures deposits at credit unions. In both cases, deposits are insured up to $250,000 per depositor, per ownership category, per institution.
Here’s how FDIC and NCUA deposit insurance works:
— If you have two checking accounts at separate banks, with each account holding $250,000, all of your money is insured by the FDIC because your accounts are at different banks and each is within the limit.
— If you have a personal checking account and a business checking account at the same credit union, with each account holding $250,000, all of your money is insured by the NCUA because each account is within the limit and they are two different ownership categories (personal and business.)
— If you have two personal checking accounts at the same bank, with each account holding $250,000, only one of those accounts is eligible for FDIC insurance because the depositor, ownership category and bank are the same.
Should You Keep Your Money at One Bank or Different Banks?
Keeping your money at one bank or different banks is largely a personal preference.
If you want to easily keep track of your money, it might make sense to maintain a single checking account at one bank. Sticking with one bank might also help you build a banking relationship that makes it simpler to take advantage of loans, credit cards and other products.
But if you want to set aside money for different purposes — for example, one for everyday expenses and another for emergency funds — it may be best to stash the money in different accounts so you don’t mingle the cash. Plus, you can maximize FDIC or NCUA insurance coverage by keeping money at different banks.
Regardless of whether you’re setting up checking accounts at one bank or multiple banks, ask yourself these questions:
— Does the bank offer a network of easy-to-access ATMs?
— Does the bank operate branches?
— What are the account fees and minimum balance requirements?
— Does the bank offer a sign-up bonus for opening a checking account?
— Are the bank’s deposits insured?
— Does the bank provide easy-to-use apps and online financial tools?
Hopkins stresses the need to evaluate a financial institution’s reputation, including its customer service track record, when deciding where to open a checking account.
“In today’s digital age, being able to resolve issues quickly and efficiently through a preferred communication channel is invaluable,” Hopkins says. “It’s like having a reliable mechanic. You hope you don’t need them, but when you do, good service is priceless.”
How Do You Manage More Than One Checking Account?
You don’t need to be an accountant to manage more than one checking account. But you do need to stay on top of your accounts when you keep money in multiple places.
Matt Gromada, head of family banking at JP Morgan Chase, warns that it can be time-consuming to juggle different balances, debit cards and bank statements. In addition, you need to pay close attention to fees and minimum balance requirements.
“Carefully consider your financial situation and goals and weigh the benefits of multiple accounts against the effort required to maintain them,” Gromada says.
If you choose to set up more than one checking account, here are some tips for managing them:
— Regularly review your account balances. This can help prevent overdrafts and other banking hiccups.
— Set up alerts. For each account, activate alerts that notify you about various activities, such as a balance falling below a certain amount.
— Keep track of your account information. Keep the information on your accounts in one place, such as a spreadsheet or an app.
— Consider linking accounts. Connecting multiple checking accounts lets you quickly shift money from one place to another when needed. Just be sure to resist the urge to dip into an account that you’ve created for specific goals, such as setting aside money for a home improvement project.
— Spread around your cash. Be sure none of your checking account balances exceeds the FDIC or NCUA insurance limits.
[See: Best High-Yield Savings Accounts]
What Are the Pros and Cons of Having Multiple Checking Accounts?
Having multiple checking accounts comes with both advantages and disadvantages.
Pros
— Robust financial management. “Think of it like giving your money different jobs: One account might handle your day-to-day expenses, while another could be reserved for fun spending and bigger purchases,” Gromada says. “This way, you can see exactly where your money is going, and it simplifies tracking.”
— Separation of personal and business expenses. If you run a business, it’s critical to build a wall between your personal and business finances. By opening separate accounts for your personal and business needs, you can maintain accurate financial records for your business, says John Dustman, senior vice president at Axos Bank.
— Maximized insurance. Using multiple checking accounts can enable you to maximize your FDIC or NCUA insurance coverage if the accounts are at different financial institutions or in different ownership categories.
Cons
— More monitoring. Keeping money in more than one checking account might be more of a hassle than it’s worth, since you’ll need to track balances and other financial details in more than one place. “The more accounts you have, the harder they can be to keep track of,” Hopkins said. “It’s like trying to stay up to date with several friends who all live in different places — it takes extra time and careful planning.”
— Additional fees and requirements. If you’re managing more than one checking account, you might end up paying more in fees or juggling more requirements, such as maintaining minimum balances in multiple places.
— Lack of interest. Many checking accounts pay little to no interest. If you’re stashing a lot of your money in checking accounts, you might be missing out on interest that you could be earning with a savings account, money market account or certificate of deposit.
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How Many Checking Accounts Should You Have? originally appeared on usnews.com
