How Many Bank Accounts Should I Have?

by Banking, Manage Money

For most people, you should have two bank accounts: a checking and a savings account. However, that may not be the right answer for you as there are plenty of things to consider when deciding how to manage your finances.

How Many Bank Accounts Can You Have?

There’s no limit to how many bank accounts you can have. As long as you meet the bank’s requirements for opening an account, you can have as many as you like.

But don’t go crazy. Managing multiple accounts can be tricky and requires careful attention.

What Types of Accounts Are Available?

There are a large number of account types. Let’s start by looking at the most common first.

Checking and Savings Accounts

The two most common types of bank accounts are checking and savings. Almost everyone should have both of these accounts because they meet your basic financial needs.

A checking account allows you to deposit and withdraw money for regular expenses. If you want direct deposit payments from an employer, they will send those to this kind of account.

Though checks are not nearly as standard as they used to be, the checking account is still the primary way to access your money. This is primarily through a debit card, which uses money directly from the checking account. The debit card is used for purchases or to get cash at ATMs.

The checking account is essentially a virtual pocket for your money that can be accessed as easily as cash without worrying about losing that cash. On the other hand, savings accounts are more like a safe with a hole to drop coins. It’s easy to put money in but takes a little more effort to get it out.

Savings accounts typically allow for unlimited deposits but not unlimited withdrawals. In return, they offer interest, meaning your money multiplies just by being in the bank.

Some banks may allow withdrawals or ATM use from savings accounts. But this usually incurs a penalty making it a better option to use a checking account instead.

Money Market Accounts and Certificates of Deposit (CDs)

Money Market accounts are a type of hybrid between checking and savings. Typically, they offer a slightly higher interest rate than a standard savings account and a debit card to access the money.

The trade-off is that you are limited in the number of withdrawals you can make. You won’t make purchases every day with a money market account, more like a couple of times a month.

Money Market Accounts can make it an excellent option for emergency funds. The money increases due to interest when you don’t need it but is easily accessible when you have a large or unexpected expense.

Certificate of Deposits, or CDs, are another type of bank account. These are more of a long-term investment. With CDs, you put money into the account and agree not to touch it for a certain length of time, typically six months to five years.

It’s essentially loaning money to the bank, which they agree to pay back, plus interest. Interest rates on CDs are slightly higher than savings accounts, and the longer the term is, the higher that interest goes. That means a five-year CD will have a higher interest rate than a one-year.

The major downside is withdrawing money early from CDs typically incurs a cost, which can cause you to lose money.

Reasons for Opening Multiple Accounts

Most people should have at least two bank accounts: a checking account for their regular expenses and savings account for anything on top of that. But there are many reasons why you may choose to have even more bank accounts. Let’s look at some of the most common.

Separate Transactions

Creating separate accounts for separate transactions is a common reason for opening multiple accounts. If you’re self-employed, you’ll want to have a personal checking account for your living expenses and a business checking account for your work expenses.

Even if you’re not self-employed, you may want to separate your spending money from your house payments, ensuring you never have to worry about accidentally overspending and missing a payment.

Along the same line, it can help have multiple savings or money market accounts with different purposes. You might have separate accounts for an emergency fund, saving to buy a house, or a college fund for kids. While this compartmentalization can be accomplished with budgeting software like You Need a Budget (YNAB), Mint, or Personal Capital many prefer to keep their money in separate accounts.

If you want to be intentional about how all of your money is being used, setting up multiple bank accounts with different purposes might be helpful.

Signup Bonuses

Many banks offer a cash bonus for signing up for a new bank account, some offering as much as $500. Typically, this comes with some stipulations. They almost always require a direct deposit to be set up and may require a minimum balance or number of transactions. The account will also have to be open for a certain amount of time, depending on the bank.

If you sign up for accounts to scoop up the bonuses, be diligent in meeting the conditions so you don’t get hit with unexpected penalties.

FDIC Coverage

Though it rarely happens, occasionally banks fail and cannot pay out the money people have put in their accounts. For this reason, many banks get insured by the FDIC, a part of the US government. The FDIC will pay the customers in the event of a bank’s failure.

It’s always a good idea to put your money in an FDIC bank. This prevents you from losing your life savings if the bank goes under.

The FDIC does have limitations on its insurance, however. The general rule is that they will insure up to $250,000 per person in any given bank. They won’t cover anything over that.

If you’re dealing with more money than $250,000, it may be prudent to open accounts at multiple FDIC banks. This will let you go up to that limit at each bank and have all your money insured.

Bank Specific Perks

Similar to signup bonuses, some banks offer perks for working with them. These could be local perks, cashback rewards, travel rewards, money management tools, reduced interest rates on loans, etc.

Transferring Funds

If you work with a lot of cash, you benefit from having a local branch with ATMs that accept cash deposits. However, you may get better perks or interest rates from an online account. In this case, it’s helpful to have both so that you can transfer money between them, making good use of your cash.

If you want to do international money transfers, you’ll likely have to open a new account as that’s not something every account offers.

Pros and Cons of Having Multiple Accounts

Pros

  • Helpful for budgeting
  • Keeps some money accessible
  • Lets some money earn interest
  • Makes use of multiple account perks and bonuses
  • Protected in case of bank failure

Cons

  • More work
  • Money can get tied up in some accounts
  • Must meet all account requirements
  • Risk of overdraft fees if not carefully managed

How to Open Multiple Accounts

When opening multiple accounts, you’ll first have to decide on what banks to use. Do some research into your options because there are a lot of things to consider.

What to Check For

  • Accounts should be free
  • ATM availability and fees
  • Minimum balance requirement
  • Minimum number of deposits
  • Overdraft fees
  • Signup bonuses
  • Additional bank perks

Start with a Checking Account

A checking account should be the first account you open. This will allow you to deposit and withdraw money easily. It’s as accessible as cash in your pocket but a lot safer.

Next, a Savings Account

If you have money that you don’t need to spend right away, the next step is to open a savings account. This will earn interest on everything you don’t need to access immediately. It also helps protect you from accidentally spending money you meant to save.

Then Whatever’s Clever

With those two accounts set up, the rest is up to you. Need an emergency fund? Set up a money market account or an online savings account. Are you saving for a house? Start a savings account just for that. Take an intentional look at your situation, and determine which accounts will best meet your needs.

How to Manage Multiple Accounts

The hardest part of multiple accounts is managing them. It requires a very watchful eye.

Be sure to regularly check on all your accounts to ensure you don’t overdraft. Fortunately, most banks now have online banking and mobile apps. Make use of these to keep track of your money with a tap on a screen.

Budgeting software can also help! Options like You Need a Budget (YNAB), Mint, or Personal Capital, can be an essential tool to keep you on track.

Related Questions:

Do Too Many Bank Accounts Hurt Your Credit?

No, the number of bank accounts you have does not impact your credit.

Is It a Good Idea to have Multiple Bank Accounts?

Yes. Most people should have at least one checking and one savings account.

How Many Savings Accounts Should I Have?

At least one, but any more than that is up to you. It can be wise to save for different purposes, such as a house, car, or emergency fund, under other accounts.

How Many Bank Accounts Should a Single Person Have?

At least two: a checking and a savings. Other than that, they should have as many as necessary to meet their needs.

How Many Bank Accounts Should I Have for Budgeting?

This is very much a matter of personal preference. Some people will budget all their expenses in one checking account and all their savings in one savings account. Others may break it down into categories with multiple checking and savings accounts. We believe simple is best and encourage you to keep your accounts to a minimum.

How Many Accounts is too Many?

However many you can’t easily keep track of. If you start incurring fees or penalties because you neglected or forgot about an account, or find yourself constantly shuffling money around, you have too many.

How Many Bank Accounts Do Millionaires Have?

Most millionaires put the majority of their money in investments rather than banks. However, what they do put into banks will be spread out among many accounts and many banks because the FDIC only insures up to $250,00 per person per bank.

What is the Average Number of Bank Accounts Per Person?

Payments Report indicates that the average number is 5.3. A typical number for regular customers is three: a checking accounts, a savings account, and a retirement fund.

Final Thoughts

When it comes to deciding how many accounts to have, ultimately, it’s up to you. There’s no one correct answer. At Avocado Finances, we believe simplicity is best and suggest you keep your accounts to a minimum.

The best approach to take is determining what your needs are and which accounts will best meet them. Most people will want at least one checking account and one savings account.

Seth Guthrie

Seth Guthrie

Seth has always taken opportunities as they've come, which has taken him in many exciting directions. It's helped him realize the importance of intentionally pursuing the Wealthy Life; so that he can experience his faith, family, and passions to their fullest extent.

You Might Also Like

How to Avoid PayPal Fees

How to Avoid PayPal Fees

Whether you are an individual or business owner, paying fees to move money isn’t fun. When it comes to PayPal, there are a few ways to avoid paying fees, and when avoiding them is impossible, there are ways to minimize...