Should I keep accounts at multiple banks?

Let’s be real: Banking can be complicated. From chequing and savings accounts to RRSPs and TFSAs, figuring out what accounts you should and shouldn’t have can be a challenge.

To complicate things even further, you might be wondering if you should keep all your accounts at the same bank or if you should split your money between multiple financial institutions.

As is true with most things in life, there’s no easy answer to this question. There are a number of benefits to having multiple bank accounts as well as some advantages to keeping your eggs all in one basket.

To help you decide which bank account strategy is right for you, we’ll take a look at the pros and cons of each option. So, should you keep accounts at multiple banks? Keep reading to find out!

Is it good to have multiple bank accounts at different banks?

Long story short, there are as many advantages and disadvantages to having accounts with multiple banks as there are to keeping your accounts all in one place. The reality is that you need to determine which banking strategy works best for your personal financial style.

To get you started, here are the pros and cons of both strategies:

Keeping your money at one bank: Pros and cons

Keeping your money all in one bank is a popular choice among people who value simplicity in their lives. Some of the primary advantages to single bank finances include:

• Simplified money management – If all your accounts are at one bank, you don’t have to worry about juggling your finances. What you see is what you get when you sign in to your online banking platform, so there’s no need to fret about accidentally overdrafting on an account (as long as you regularly check in with how much you have).

• Lower fees – Some banks charge fees to open or maintain an account. In these situations, having one account or having multiple accounts at the same bank often means lower fees in the long term. Of course, if your banks don’t charge fees, this might not be a concern. The cost-conscious among us should still consider any potential fees before opening new accounts at multiple banks.

• Better banking relationships – Some banks provide perks and rewards for being a long-term customer or for having multiple accounts at their institution. For example, meeting a certain balance threshold at some banks qualifies you for access to premium services and extra financial advice. If you have accounts at multiple banks, you might not build the same long-term relationship with all of them.

• Occasional increased interest – As we’ve mentioned, some banks offer benefits for doing most of your financial management at their institution. One of the most obvious ways that they do this is through increased interest on certain accounts. With some firms, you can get a higher savings interest rate for having a higher account balance. If your money is spread out in multiple accounts, this can be hard to achieve.

All good things have a few drawbacks, and keeping your money all at one bank is no exception. Some of the primary disadvantages to this single bank strategy include:

• Potential increased risk – Most reputable banks have great security and CDIC insurance. But if you keep all your money in one place and someone were to gain access to your account, they could drain your funds before you even notice. Keeping your money in different banks can sometimes help lower this risk, so long as you adequately protect all your accounts.

• Loss of perks & rewards – Although some banks do offer bonuses for being a loyal customer, you can often get better rewards by shopping around. Opening accounts at multiple institutions lets you access rewards credit cards, investment accounts, and other perks that your current bank doesn’t even offer.

Opening accounts at multiple institutions: Pros and cons

While some folks like to put all their money at one bank, others like to open multiple accounts with different financial institutions. There are a number of key benefits to this strategy, including:

• Helpful separation of funds – If you’re the type of person that struggles to follow a budget, having your funds spread out in multiple accounts can be a great way to stay on target. Keeping your money in multiple accounts at different banks can be even more beneficial. That’s because there are usually longer processing times for inter-bank transfers. These longer processing times can deter you from making a last-minute transfer to fund an impulse purchase.

• Extra benefits – Although opening accounts just for the fun of it isn’t necessarily a great idea, some accounts do come with benefits that you can’t get elsewhere. For example, opening an account with KOHO gets you instant cash back on groceries, bills, and services. Needless to say, that’s not something you can get just anywhere.

• Enhanced risk & security – The adage that you shouldn’t keep all your eggs in one basket is particularly true in the world of personal finance. Spreading your funds out and placing them with different reputable financial institutions can often protect you if someone gains unauthorized access to one account.

• Additional CDIC insurance – The CDIC insures eligible chequing and savings deposits at member banks up to $100,000. That’s good news for all Canadians, but there are limits to that coverage. In fact, you only get up to $100,000 in coverage at each bank that you have an account at. So if you want to protect more than $100,000 in assets, you’ll need to spread that out and deposit your funds at multiple banks.

As is the case with depositing all your money at one bank, there are downsides to the multi-bank strategy, such as:

• Difficulty reaching minimum balances – Some financial institutions have minimum required balances on all their accounts or else you get charged a monthly fee. Depending on how much you have in your chequing or savings, this may not be an issue. But if you regularly struggle to meet these minimums, it might be best to put all your funds in one account at one bank.

• Financial organization issues – If you find it difficult to manage multiple bills or multiple credit cards each month, having multiple banks is likely not the best choice for you. Opening multiple bank accounts does come with some great benefits, but you won’t get to appreciate those advantages if you’re struggling with managing all those accounts in the first place.

Tips for managing money at multiple banks

When you have all of your money at one bank, managing your finances is fairly straightforward. You simply need to have a budget and you need to keep track of the funds that flow in and out of your accounts.

However, when you have multiple accounts at multiple banks, you’ll need to have a strategy in place to keep things organized. While there are multiple ways to manage money at more than one bank, here are a few key tips to get you started.

1. Give each account a purpose

There are many reasons why you might want to open accounts at more than one bank. Regardless of why you open an account, be it a great sign-on bonus or a desire for extra security, you should give each account a purpose.

Assigning a purpose to each of your bank accounts makes it easier to track the money that goes in and out of them. It also helps you mentally visualize your various accounts, which can make it easier to stay on budget.

For example, you can designate one account for general spending and another for emergency savings. If you’re trying to save up for a specific goal, such as a down payment for a mortgage, you can open a savings account at another bank and designate it for that purpose.

By giving each account a purpose, you’ll likely find it easier to remember how much money you have at a given bank. Doing so can also motivate you to make deposits into certain savings accounts because you have a clear mental picture of how that money will be spent in the future.

2. Create a list of fees

Although KOHO doesn’t charge you hidden fees, some banks and financial institutions do. If this is the case at any or all of your banks, you’ll want to make a list of all the fees that you could possibly be charged each month.

Things like monthly maintenance fees are particularly important to take note of because they can regularly affect your bottom line. You’ll also want to research whether or not you can avoid these fees by maintaining a specific balance in a given account.

Once you have your list of fees for all your accounts, figure out how much you need to keep at each bank to avoid unnecessary fees. Then, either make a plan to always maintain these minimum balances or close any accounts that are just going to drain your money through fees in the long term.

3. Do all your spending through one account

We’ve already discussed the value of assigning a purpose to each of your accounts. However, you can take this a step further by making one of your accounts your primary spending account.

Doing so is particularly important if you find it difficult to control your spending. If you have money flowing out from multiple accounts, it can be hard to know how much money you truly have at any given time.

One option is to use your KOHO card for the bulk of your purchases. Since doing so gets you cash back on groceries, bills, and services, it’d be a pretty smart decision. Using a prepaid credit card like your KOHO prepaid card also helps you manage your monthly spending. You can either directly deposit your paycheque into your KOHO account or you can transfer money as needed from a bank.

Alternatively, if you want to use your KOHO card and a credit card, designate one chequing account as your primary bill-paying account. You can use that account to both fund your KOHO card and pay your credit card bill. That way, you can see exactly where your money is going each month.

So, should I keep my money with one bank or many?

Keeping your money with one bank does have its benefits, but so does a multi-bank strategy. The key is figuring out which option is best for your personal financial style.

If you’re more interested in keeping things simple, the one bank lifestyle might be best. Otherwise, you may find that having accounts at multiple banks provides you with a slew of fantastic benefits.