Most Americans Bank at More Than One Institution: Should You?
Do you bank at more than one institution? In GOBankingRates’ Best Banks 2023 survey, 56% of overall respondents said they would have different types of accounts across various banks. While this response does mark a slight decline from last year’s figures, where 70% of surveyed respondents said they would be interested in banking at multiple institutions, it still makes up well over half of Americans.
How can you tell if banking at multiple institutions is financially beneficial to you? Here are some of the advantages that come with banking at more than one place.
Optimizing for Best Interest Rates
Jesse Cramer — founder of personal finance blog The Best Interest and relationship manager at Cobblestone Capital Advisors — said it’s OK to use different banks for different services. This is particularly true when optimizing for the best interest rates. As an example, Cramer said the best savings account interest rate may not come from the same bank offering the lowest mortgage rates. As a result, it can make sense to keep a savings account with Bank A and negotiate your mortgage with Bank B.
Just be careful the math in this decision works in your favor, not against it.
“For some people, the decision to split services across multiple banks might lead to thousands, or more, of extra dollars every year,” Cramer recommends. “For others, the decision to split services might end up being a $50 annual profit.”
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Multiple High-Yield Savings Accounts Enable You To Earn Competitive Rates
If you’re not quite sold on the idea of banking at multiple institutions, you might reconsider when it comes to having your high-yield savings accounts (plural) work in your financial favor.
Gary Zimmerman, founder and CEO of MaxMyInterest, said unlike opening several credit cards, there’s no impact to your credit if you open multiple savings accounts. Banking customers can open as many accounts as they like across several banks. The more bank accounts you have, Zimmerman said, the more FDIC insurance coverage you can receive. As a result, you’ll find more options when searching for the best rates on deposits or loans.
Those looking to open savings accounts specifically will view the interest rates as the most important factor in an FDIC insured bank. Over time, a banks’ needs for deposits, and its interest rates, does change. Rather than think about picking one savings account, Zimmerman recommends having multiple savings accounts. Be ready to move funds to the bank offering the highest rate each month.
“Interest compounds over time, so it’s important to make sure your cash is always earning the highest yield,” said Zimmerman. “By opening multiple high-yield savings accounts and keeping tabs on rates, you can make sure you’re always earning a competitive rate on your money.”
Added Layer of Diversification
In the current economic climate, it’s difficult to predict what will happen next. Most banking customers, whether they bank at one institution or several banks, are hard at work protecting as well as diversifying their financial assets.
Making the decision to bank at more than one institution can provide you with an extra layer of diversification. Joseph Carpenito, financial advisor at Materetsky Financial Group, said it can enable you to develop a banking strategy. For example, Carpenito said you might use one bank for everyday transactions like your checking and/or savings accounts. Another institution could meet other financial needs such as investments or loans.
So, should you start banking at multiple institutions? The answer will require a little homework on your end. Carpenito recommends best practices like researching and comparing different banks and their products, keeping track of all account information and login credentials (if you decide to say yes to multiple banks) and being mindful of potential fees.
Don’t forget other small, but significant, conveniences either. When picking another financial institution for the purposes of banking, Carpenito said to consider location, online banking options and overall customer service.
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