They say “never put all your eggs in one basket”. When it comes to your hard earned money, does it make sense to keep it in the same basket, or is it safer to have a few baskets? And by that we mean: should you split up your finances between different bank accounts — how many, and which kind? If online banking is one of your choices, you may even be asking yourself “What is a mobile banking example?”
Every Account Has Its Purpose
It’s not that uncommon to have several bank accounts. It’s tempting to get a credit card (and an account associated with it), and then another one, and then another one. Plus, when you change your job, your employer may offer you a qualified retirement plan. Long story short, everyone tends to accumulate accounts over time. But the question is whether it’s worth canceling some of them; or is having a few accounts at different banks is actually a good idea?
In a nutshell, there’s nothing wrong if you open a few bank accounts, especially if they carry different purposes. For instance, checking and saving accounts offer unique benefits so opting for both may actually have a positive impact on your finances. One of them makes your daily transactions and ATM withdrawals practically fee-less, while the other one promises higher interest rates. If you often travel abroad, it also makes sense to get a card featuring lower fees for international financial operations.
Pros and Cons of Having Many Bank Accounts
If you juggle your bank accounts proficiently, you will be able to take full advantage of banking offers. On the other hand, keeping track of all your cards and accounts might become slightly more difficult.
Pros of having multiple bank accounts
- You ensure that varying types of bank accounts meet your particular saving and spending needs
- You divide your money into various funds; for instance, an emergency one (this could be your saving account) and a liquid fund for daily transactions
- With some types of saving accounts, you can benefit from coverage in the event of your banking institution going bankrupt
- You’re able to take advantage of different banks and their unique offerings
Cons of having multiple bank accounts
- It’s hard to keep track of all your accounts
- You might overlook fraudulent activities or double-charges
- You might miss an opportunity to get more benefits from a particular banking proposition if all your finances are spread among various accounts, let alone banks
Having said all of that, you shouldn’t say “no” to an opportunity of having a few convenient instruments to manage your finances. Below, you’ll find a list of bank accounts you might want to consider.
A checking account is needed to receive payments and spend the balance on your needs. This financial tool is ideal for planning your budget. Due to the inability to spend more than you have (or for a fee that is more than that of a credit card), a checking bank account promotes a reasonable approach to spending.
In addition to this, checking accounts are associated with lower fees for monetary transfers, POS transactions, and ATM operations. On the downside, they rarely come with interest rates on account balances — but if they do, these rates can be miserably high.
If you save more than you spend, it’s worth opening a saving account. Its benefit is increased interest rates (up to 3.5%) and a sense of security. Many saving accounts have government deposit guarantees. In other words, they are insured against the inability of your financial institution to pay its debts. No other type of bank accounts provides guarantees of this kind.
On the other hand, you will have to sacrifice the luxury of managing your money how you see fit when you see fit. Many banks impose restrictions on withdrawing funds from savings accounts or early account closing. You can still get your money, but you have to pay either a huge fee or lose your interest income.
Money Market Account
If you want to have the best of both worlds, a money market account will come very in handy. Basically, it’s a cross between a checking and saving account. A money market account offers some interest rates but doesn’t set harsh restrictions on cash withdrawals. All in all, it’s a nice alternative to a saving account. The money that remains on your checking account at the end of each month can be transferred to this account to generate some interest income. On the flipside, with interest rates of 0.5% or less, it won’t earn you as much as a regular saving account.
High-Yield Bank Account
Another effective way to increase your savings is a high-yield bank account. In comparison to common saving accounts, it offers higher interest rates (up to 5%). However, to get the promised interests, you will have to maintain a certain minimum balance (normally, a few thousand dollars) and not withdraw money within a certain period of time.
High-yield accounts are a shtick of online banks. They have neither physical offices nor ATM infrastructure meaning their operational expenses are lower than those of traditional banks. As a result, they offer more generous interest rates. The fly in the ointment is that your deposits are not secured and there is a risk of losing your money if the online institution declares itself bankrupt.