6 Reasons To Spread Your Money Around Multiple Banks

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Although you should always look for ways to declutter your financial life, it sometimes makes sense to have accounts scattered across more than one bank.

The following is a look at situations where you’d be wise to divide your money among two or more financial institutions simultaneously. If any of these scenarios apply to you, consider spreading your money around, even if it means keeping track of another routing number.

Banks Incentivize Bundled Services

Like insurance companies, banks offer better rates, deals and discounts for customers who partake in more than one of their offerings. In many cases, all you need is a free checking account to access the incentive that interests you.

“There are times when a bank may offer a special deal on a home equity line of credit for existing customers,” said 20-year lending industry veteran Eric Jeanette, president of Non-Prime Lenders. “In just that one example, you may miss out on an opportunity if you did not have an account with that bank.”

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There are many other scenarios — including the pursuit of cheaper loans, higher savings yields or better CD rates — that could spur you to open a new account that you don’t really need.

“Some banks also have different fees for services like wire transfers or safe deposit boxes,” Jeanette said. “If you have a relationship with more than one bank, you have an opportunity to choose.”

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Different Banks Excel at Different Things

Keeping all your accounts with one institution is convenient, but that’s not always what’s best for your money. For example, you might want a checking account that gives you early access to direct deposits and free peer-to-peer (P2P) transfers to friends at different banks. But the bank with the best savings rates might not offer those features to its checking customers.

In that scenario, the only way to get all of what you want is to join two banks, and that’s fine — decide where to stash your cash based on the merits of the account, not the institution that hosts it.

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“One bank may provide higher interest rates on savings accounts, while another may offer superior credit card rewards programs,” said Andy Flynn, vice president of finance and treasury with a medical device company called SpryLyfe. “By maintaining accounts at many banks, you can maximize your financial status by taking advantage of various incentives.”

You Might Want To Establish a Hometown Branch If You Move

Online banks offer better rates and lower fees, but brick-and-mortar institutions give you access to branches and humans — and that’s especially important if those humans are members of the community in your new hometown after a move.

“In case of relocation, opening an account in a nearby bank can be more convenient,” said Susannah Harmon, lending industry veteran and founder of Car Title Loans 123.

Even if you’re not a transplant, having a bank branch in town can offer security and peace of mind.

“A local bank is convenient and personal,” said Melanie Musson, a finance expert with The Truth About Insurance. “Many people enjoy banking in their community.”

Cash Is Often Useless at Online Banks

Moving isn’t the only reason to join a bank with physical infrastructure near you. If you have a job or side hustle that pays cash, you might find that turning paper money into numbers on a computer screen isn’t so easy, even with major digital institutions.

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For example, Ally Bank — one of the biggest names in the industry — still doesn’t accept cash deposits. For servers, bartenders, and anyone who comes home from work with wads of money, a checking account at a local branch provides a wormhole between your pocket and your higher-yielding online account.

Credit Unions Serve Members — and Members Have Accounts

Credit unions are member-owned nonprofit organizations that are famous for excellent customer service and better rates than you’d find at traditional, for-profit banks. Money experts often advise checking local, national or industry-specific credit unions before borrowing money for a car, boat, home or anything else.

Their favorable terms, however, are a benefit of membership, which typically requires at least a nominal deposit in a credit union account.

“Credit unions often offer lower interest rates than other local banks,” Musson said. “And when they don’t, they’ll often match another institution’s lower interest rate. But usually, you must have an account at the credit union to qualify for its loans.”

If You’re Doing Well, One Bank Can’t Insure All Your Cash

“You can take that to the bank” is an expression people use when they’re supremely confident in what they’re saying. That expression probably didn’t exist before 1933.

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That year, the Federal Deposit Insurance Corporation began guaranteeing deposits, which made the bank the safest place in the world for your money — but that guarantee runs only up to $250,000.

If you’re doing so well that you use the word “only” before you say “$250,000,” then you need accounts at different banks for all the right reasons.

“Many individuals choose to have accounts at more than one bank because FDIC insurance limits only cover $250,000 per depositor, per insured bank,” said Wall Street strategist Josh Dudick, CEO of wealth and investment site Top Dollar.

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