Key insights:
- Having multiple bank accounts, such as checking, savings and Certificate of Deposit (CD) accounts, can help you maximize the features of different types of bank accounts
- The right number of bank accounts is different for everyone and depends on your needs and goals
- Consider your spending needs and savings goals to determine how many accounts make the most sense for you
It’s common to have multiple bank accounts, such as a checking and a savings account. For some people, having several bank accounts can be a useful way to manage a budget or work toward financial goals. Maybe you’re splitting expenses with a significant other, so you also have a joint account.
The right number of bank accounts to have is different for everyone, but it often makes sense to have more than one. That way, you may leverage the features that different account types offer to your advantage. Let’s examine why you might choose to have multiple bank accounts, tips for determining how many to open and how to manage them.
Should you have multiple bank accounts?
Having multiple bank accounts can be a good thing, depending on how you’re managing them. Multiple accounts can help make it easier to manage a financial plan, cover joint expenses and save money.
That said, there are risks to having too many accounts. While bank accounts generally aren’t factored into your credit scores, banks do have their own reporting system for deposit accounts that considers factors such as unpaid negative balances, bounced checks and involuntary account closures. Negative marks can make it more difficult to open bank accounts in the future.
It’s important that you can reasonably manage your accounts, no matter how many you open.
How do you know how many bank accounts you should have?
The number of accounts you should have depends on how you plan to use those accounts. To figure out how many bank accounts you should have, you might consider:
- Financial needs: If you have several expense categories or shared expenses with a partner, you may want to set up at least 2 checking accounts to cover personal and joint expenses.
- Savings strategies: You may want to have a savings account dedicated to each of your savings goals, which could result in 5 to 10 accounts. Or, if you prefer to simply separate your emergency fund from those other goals, you may only have 2.
- Annual percentage yield (APY): The higher the APY on a savings account, the more your money can grow (just remember that savings accounts typically have variable interest rates, which means they can change over time).
- Minimum opening deposit requirements: Some banks may require you to deposit a certain amount to open an account, while others will not. If you’re just starting to save, you may want to prioritize the latter.
Why would you have more than one checking account?
Checking accounts are designed for everyday expenses. They allow you to deposit money and pay bills. Typically, checking accounts come with a debit card you can use to make purchases and withdraw money at ATMs. You don’t usually earn interest on money in a checking account, but it provides flexibility for handling everyday expenses.
Having more than one checking account could make managing your finances easier. Here are some reasons you might consider this:
- Sticking to a budget: When you split your funds into multiple accounts, it can prevent you from overspending. For example, once your discretionary spending account is low, you’ll know it’s time to cut back until your next payday.
- Simplify expenses: If you and your partner share some financial responsibilities, such as rent, utilities or groceries, having a joint checking account can help simplify the process. You can both control how much you contribute to the account, and having an account for shared expenses can help make it easier to track joint spending while keeping your personal spending separate.
- Keeping business expenses separate: Maintaining a separate checking account for your business or side hustle helps make it easier to track income and expenses. A separate account can be especially helpful at tax time.
Factors to consider when opening multiple checking accounts include:
- Account fees: Checking accounts may come with monthly fees, out-of-network ATM fees, non-sufficient funds (NSF) fees, check fees and inactivity fees
- Minimum balance requirements: Some accounts may allow you to waive the monthly maintenance fee if you hit their minimum balance requirement
- Account accessibility: Some banks may have better accessibility options, such as a larger ATM network, than others
Why would you have more than one savings account?
Savings accounts are designed to help you store and grow your money over time. You can earn interest on your deposit. While money in a savings account is generally easily accessible, there may be limits on the number of withdrawals you can make each month. That’s one reason why it may make sense to have more than one.
A savings account can be a great place to build your emergency fund or save for a financial goal. Here are some good reasons to consider opening multiple savings accounts.
- Build an emergency fund: A savings account can be a great way to help keep your emergency fund accessible and separate from other savings goals.
- Target specific savings goals: If you’re saving for a few different things — like a vacation or a new car — having individual savings accounts for each goal may help you track progress more effectively.
- Maximize benefits and promotions: Many banks offer new account promotions, like a high APY if you meet deposit requirements, or a cash bonus for maintaining a certain balance. These promotions can be a good way to earn extra income from your savings accounts.
Other types of bank accounts to consider
Checking and savings accounts aren’t the only places to keep your money. You may also consider MMAs and CDs.
Money market accounts (MMAs)
Money market accounts offer a blend of checking and savings account features. They usually have higher interest rates than regular savings accounts and may have debit cards and check writing access. However, they can also have some restrictions, such as minimum balance requirements or transaction limits.
Certificates of deposit (CDs)
Certificates of deposit (CDs) are time-deposit accounts that typically offer higher interest rates than traditional savings accounts. CDs require you to lock your money away for a set term — usually a few months to several years. A CD may be a good option if you don’t need immediate access to your funds. Just be aware that withdrawing money before the term ends may result in penalties.
Tips for managing multiple bank accounts
The more bank accounts you have, the more complicated things can get. It’s important to have a plan for how you’ll manage your accounts to help avoid fees and make progress toward your goals.
A few ways you can do this include:
- Using automatic transfers to take out the guesswork: You can direct money to automatically pay bills and funnel funds to certain accounts so you won’t have to manually transfer funds every month.
- Signing up for account alerts: This can be helpful for checking accounts that may see a lot of traffic as you move funds where they need to go. You may, for example, be able to get alerts if your balance falls below a certain amount.
- Making time to regularly review your account balances: This can help ensure that you’re meeting any requirements to avoid account fees and see the progress you’re making toward your various goals.
Deciding how many bank accounts you need is an important step to managing your money. Once you set them up, you can start making the most of your accounts.
Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.
