Should I split my money between banks?

Having all of your money at one bank can make managing your finances both easy and convenient. But there are some advantages to splitting your money between multiple financial institutions in Canada, too.

In particular, having more than one bank account can provide you with extra protection for your funds if you have more than the $100,000 CDIC insurance limit. Splitting your funds between banks can also give you access to extra features and benefits that you don’t have at your current financial institution. That being said, having multiple accounts can be overwhelming for some people, especially if you struggle with budgeting and cash management.

While there’s no one answer to this question that’s right for everyone, there are important benefits and disadvantages to splitting your funds between various financial institutions that everyone ought to consider. Up next, we’ll discuss some of the various pros and cons of having accounts at multiple banks so you have the knowledge you need to make the decision that’s right for your financial life.

Is it good to have multiple bank accounts in Canada?

Having a bank account is an important part of your financial life. Maintaining a bank account lets you access a slew of benefits, such as convenient access to your paycheque through direct deposit and an easy way to pay for goods and services through your debit card.

However, while many Canadians have just one chequing account, there are some who maintain multiple accounts at different banks. This raises the question: Should you have more than one bank account? Better yet—should all of those accounts be at the same bank?

The short answer is that it depends.

Having multiple bank accounts, particularly at different financial institutions, can provide you with a number of advantages that you can’t get if you do all of your banking at one place. The biggest benefit of maintaining multiple accounts is that it can provide you with an extra layer of security and insurance, especially if one of your accounts is compromised by a bad actor.

But as with all things in the financial world, having multiple accounts spread out across different banks isn’t always a good idea.

For some people, having all of these accounts can be stressful, especially when it comes to ensuring that you have enough funds across your accounts to pay for your bills. Some Canadians also find that it’s more difficult to budget if their money is split between different banks. Of course, some people actually use multiple bank accounts as a budgeting tool, so it all really depends on your personal money management style and what works best for you.

Advantages of having multiple bank accounts

As we’ve already mentioned, there are quite a few advantages to splitting your money between multiple banks in Canada. We’ll take a closer look at some of these benefits in this section.

Extra CDIC insurance coverage

One of the most commonly cited reasons for opening bank accounts at multiple financial institutions in Canada is that doing so provides you with extra CDIC coverage.

The CDIC, or Canada Deposit Insurance Coverage, is the Crown corporation that provides deposit insurance for the vast majority of banks and financial institutions in Canada. It’s an important part of the Canadian banking system because it’s what provides financial protection to Canadians in the event that a bank fails and can’t pay back all of its account holders.

Bank accounts at CDIC member institutions provide a maximum coverage limit of $100,000 for eligible deposits per person. The CDIC uses the term “eligible deposit” to refer to cash held in certain accounts (primarily chequing and savings accounts). There are a number of other types of eligible deposits that the CDIC protects, but we’ll primarily focus on Canadian dollars held in chequing and savings accounts in this article.

If you have less than $100,000 in cash in a chequing or savings account at a CDIC member institution, all of your funds at that institution are likely CDIC insured in case that bank fails. But if you have more than $100,000 in eligible deposits at a single bank, only the first $100,000 is CDIC protected.

Therefore, opening accounts at more than one CDIC member bank can provide you with more CDIC insurance coverage in the event that one of your financial institutions fails.

Added account security

Most major banks in Canada take security very seriously and they have a number of safeguards in place to protect your account. However, there’s always a risk that a bad actor will gain access to your money, which can threaten your finances.

Thankfully, many major banks will help refund or recover your money if someone gains unauthorized access to your account or steals your identity (so long as you contact them within a reasonable time frame). That said, in some instances, banks won’t be able to refund your lost funds, especially if your account was compromised as a result of your own actions (i.e., sharing your password with someone else).

Therefore, having your money split between banks can lower your potential losses if someone were to gain access to one account. If you have $2,000 each in three different bank accounts and a hacker gets into only one of them, your potential losses are $2,000. That’s still a lot of money, but it’s definitely better than losing $6,000 from one account.

Peace of mind if there’s an issue with one account

We all have issues with our bank accounts on occasion. Sometimes, you lose your debit card and you have to contact your financial institution to freeze your account while they reissue your card. In other situations, your bank might place a temporary hold on your account if they notice any suspicious activity.

Regardless of the reason why your account might get frozen, however, having these sorts of issues can be a major problem if you need quick access to your money. This problem is even greater if all of your funds are in one account.

Having multiple chequing and savings accounts at various banks can give you the peace of mind you need to know that you’ll have access to at least some of your money if there’s an issue with one financial institution—especially if you have bills to pay and other immediate needs for your funds.

Easier budgeting for long-term goals

Some people opt to open multiple accounts at more than one bank because doing so makes it easier for them to budget for long-term goals.

For example, if you’re looking to save up for a down payment on a house and you want to continue building an emergency fund, having two separate savings accounts could be useful for goal tracking purposes.

You could, of course, keep all of that money in one account, too. But some people find it easier to save up for long-term goals if they can split their funds between multiple banks.

Additional account features & benefits

Last but not least, many people open accounts at different banks simply to take advantage of the various features and benefits that each financial institution offers.

In some situations, people opt to open a savings account at a different bank because it offers a better interest rate than what they can get with their current institution.

Conversely, other people opt to open accounts at awesome places like KOHO (not that we’re biased or anything) because it gives them an opportunity to earn cash back rewards and other nifty benefits that their regular bank doesn’t provide.

Disadvantages of having multiple bank accounts

While splitting your money between banks can be advantageous, there are some downsides to this tactic. Here’s a quick look at some of the drawbacks of maintaining multiple bank accounts.

Difficulty meeting minimum balance requirements

Depending on where you do your banking, you may need to meet minimum balance requirements in your chequing and savings accounts to avoid monthly fees. If you have accounts at more than one financial institution, meeting those requirements can be a challenge.

Therefore, it’s typically only a good idea to have more than one bank account if you’re confident that you can keep each account funded well beyond any minimum balance requirements. If not, it might be best to stick to just one account.

Can be challenging to manage

Although it can be nice to split up your money between banks if you’re saving up for more than one long-term goal, doing so can also add some additional hassle to your life as far as account management is concerned.

For some people, it can be a bit overwhelming to have to deal with statements from multiple accounts. Many Canadians also find it challenging to budget for their daily activities if their funds are spread out between different banks. If you’re not careful, you can accidentally end up overdrafting on one account even if you have enough funds to cover your transaction at a different bank.

This is where the question of whether or not you should have multiple bank accounts really comes down to your personal style and personality type.

If you feel confident that you can manage your money across multiple accounts, then doing so might be a worthwhile pursuit. But if you think having all these accounts will be too stressful, then you may want to stick to your current banking strategy.

Potential for fees & hidden charges

Unfortunately, not all financial institutions are like us here at KOHO where hidden fees and surcharges just aren’t how we do business. Many banks in Canada, however, charge a whole slew of fees just for having a regular ol’ chequing or savings account.

If you have an account at just one bank, it can be easier to wrap your head around all of these charges and implement strategies to avoid them at all costs. But if you have more than one account, it’s all too easy to overlook a potential recurring charge that could end up costing you hundreds or thousands of dollars over the years.

This means that, if you do end up splitting your money between banks, do your due diligence to ensure that you know what fees you’re signing up for when you open a new account.

Splitting money between multiple banks: Should you do it?

There are some very clear advantages and disadvantages to splitting your money between multiple banks. However, the only person who can decide whether to have more than one account is you.

The reality is that opening several bank accounts is really a matter of personal money management styles.

If you like the idea of splitting your funds across financial institutions to get increased security and other nifty benefits, then doing so might be a good choice. But if having all of those accounts makes you nervous about fees and budgeting, then you may just want to stick with what you have and avoid over-complicating your financial life.