As you build your emergency fund and savings, a question you might ask yourself is, “How many bank accounts should I have?” However, for most people having one bank account is a common option and there is no thought in really expanding to other accounts.
Now the majority of people really do not need more than one institution that they do banking with. And the common choice to make is to have a checking account and savings account at one bank of your choosing.
But if you’re wondering how many bank accounts should you have, some pros and cons, and the options you have — then stick with me below!
Should You Keep All Your Money in One Bank?
When it comes to bank accounts, you may consider the most convenient option to be keeping all your money in one bank. Keeping all your money in one bank may be simpler, but depending on your financial circumstances, it may not be the best.
For example, a second bank account may offer you a better interest rate which would allow your money to beat inflation long term. And for this reason, deciding how many bank accounts you should have does require some thought process.
Here’s a quick breakdown of the pros of having one bank and multiple. We’ll explore these a bit more in the next sections.
Managing accounts in one bank:
- Easy to manage and maintain from one institution instead of multiple
- A bit more protected from identity theft and potential fraud
Having more than one bank:
- Diversifying your money for budgeting and spending needs
- Better banking options pending your needs
- Higher interest rates in some savings accounts
- Testing out other banks services and perks
How Many Bank Accounts Should You Have?
Americans own about four credit cards, and over half of Americans own more than one bank account. That’s not including separate accounts for mortgages, 401ks and 529 college plans.
When it comes to having bank accounts, simplicity and optimization are key. You want the most simple set up, but the one that works best for your circumstances. Usually that starts with one checking account and one savings account.
Additional bank accounts may be a joint checking and savings account for family finances, or a separate savings account for larger expenses, such as a vacation or large ticket item.
A normal amount of bank accounts is 3 to 4 accounts, however it does depend on individual situations. Most people are happy with two bank accounts, and then open extra accounts if needed
Is It Bad to Have Multiple Bank Accounts?
Having several bank accounts is not bad — it just may be more work to keep track of all your accounts and monitor your banking activities. Ensure you check your accounts often to watch for unauthorized transactions, that any account minimums are met, and look for any changes to rates and fees.
One main reason you may want to not have multiple banks and accounts is because of identity theft.
Just ensure you stay organized, keep passwords secure, and monitor your accounts. If you have an account that is unused or seems unnecessary, then close it down.
If you have multiple bank accounts that charge you fees, you may also want to look into closing ones you don’t use.
Do too many bank accounts hurt your credit?
Your credit is a report of your financial history, like payments and debts. The total number of bank accounts you hold will not affect your credit score or report, and any information on what you use your bank account for every day does not appear on your credit history.
That’s because banks do not report banking account information to credit bureaus. Credit is calculated on financial accounts that involve lending: loans, mortgages and credit cards.
Your credit report will include unpaid debt and any judgements such as bankruptcy. But the number of bank accounts you hold will not affect your total credit report.
However, if you overdraw from your account, you will owe the bank back that might and any fees along with that. If you do not repay the amount, the bank could send that debt to a collection agency, which then could be added to your credit report.
It will also probably be reported to Chex Systems, which shows information about your banking history.