Many people know that in the financial world, the standard accounts that most adults acquire are the checking and savings account. Checking accounts and savings accounts are the standard fare for financial product usage. Most people use the checking account as their day to day account from which they make purchases. From the savings account, many people save money that they prefer to have stashed away for a rainy day. However, you should be aware that it is advisable for you to have a checking account and savings account at multiple banks. Here are five reasons why you should open accounts with different institutions.
Exercise FDIC Insurance
FDIC insurance typically insures accounts that are up to 250,000 USD. If you carry more than that in any one account, you run the risk of that money not being insured if something was to happen to the bank. If you have more than the FDIC insurable amount, you should spread these amounts around into different institutions rather than keeping them together.
Making Banking Relationships
When you want to borrow money for a home or a personal loan, most investors will let you know that you should borrow money from the bank that holds your accounts. If you have a relationship with several banks due to your many accounts, you can shop around and find the most favorable terms. This will also help you gain leverage, as you can use one bank’s rate against another to see if you can get a better rate.
As learned during the financial crisis, it is not impossible for a bank to fail and close for business. When this happens, your money may be held in limbo during a transition if the bank is merging with another bank. You do not want to keep all of your money in a limbo state and not have access during a period of bank crisis. To protect yourself keep assets at different accounts.
Though fees may seem like as small part of what should equal a lasting banking relationship, fees are important. ATM fees can add up to hundreds per year if you use out of network ATMs. To bypass the network fees, if you have accounts with the many banks in your area, you are certain to find at least one in network ATM that will not charge you fees. This can save you hundreds in money lost purely trying to access your own money.
Ease of Transition
If something happens at your bank that you are not comfortable with, such as a fee being instituted or the bank merging with another, if you have another account with another bank, the transition will be easy. Simply wire transfer your money from one account to another then close the bank account that you no longer need.
Having several different bank accounts is a matter of protection for yourself. If you have the option, open a bank account with several banks and credit unions. Make sure that you read over the terms of each account so that you are getting accounts that you truly need.
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