A good majority of people have several bank accounts which were set up for different reasons and purposes. Typically, consumers have at least one savings account and one checking account if not more. But is it necessary to have more than that when managing your money?
Benefits to Limiting Number of Bank Accounts
While it may seem logical to some people to establish several accounts to handle money for different reasons or to take advantage of higher interest rates, it can be detrimental to keep multiple accounts open. Here are some reasons why:
- You’ll pay more in fees for maintaining a variety of accounts
- You increase the risk of becoming the victim of identity theft
- You have more accounts to monitor on a regular basis
- You will have more terms and conditions to keep track of and abide by
Analyze Which Accounts Are Unnecessary
Consumers who have bank accounts open with several banks need to take stock of which accounts are in the best interest of their personal financial plans. You should consider consolidating financial accounts that are not used often and have no other benefit to you. Keep only those that remain active or you may face continual fees for inactivity with some banks. Do a comparison search online between several banks to see who is offering the best deal if your current bank is not up to par with your financial needs.
Multiple Accounts is Not Good Accounting
Some will open several accounts as a way to better track and manage money. It can be a wasted effort and incur too many fees to take the place of real accounting measures. While you may want a savings account strictly for savings, one checking account and a good ledger book is all you need to manage your money regardless of where it is coming from or going to.
When Multiple Accounts Make Sense
There are some exceptions for keeping multiple accounts. Some situations may dictate that having several accounts is actually beneficial including:
- Dependent accounts – when a child has an account held jointly with a parent
- Special tax incentives – some accounts will offer tax incentives for establishing and maintaining an account for a special purpose such as education, retirement, and health accounts.
- Savings accounts for CDs – when a saving account is invested in certificates of deposit that have different maturity rates.
- Small Business accounts – accounts that are opened by a small business owner as a way to separate business from personal finances.
Overall, it is best to limit where you are stashing your regular cash. As banks are constantly working to gain more business, they remain extremely competitive. You can use that to your advantage to get your current bank to up the ante with better incentives or you can find a new financial institution that is more inline with your needs.