It’s common to have multiple bank accounts, such as a checking and a savings account. However, there are plenty of reasons to have additional accounts to better manage your expenses and work toward your financial goals. Maybe you’re splitting expenses with a significant other, so you open a new checking account to share.
While the answer to the question “how many bank accounts should you have?” is different for everyone, 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 multiple bank accounts.
Is it good or bad to have multiple bank accounts?
It’s not a bad thing to have multiple bank accounts. In fact, it can be a good thing to have multiple bank accounts, depending on how you’re managing them. While your 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 to ensure that you can reasonably manage your accounts, no matter how many you open.
How do you figure out how many bank accounts you should have?
To figure out how many bank accounts you should have, you might consider:
- The number of financial needs and goals you have, from managing everyday expenses to saving for a vacation
- Which account types offer your desired features
- When it makes sense to group savings goals into one account or give them a dedicated account
Reasons to have more than one checking account
Checking accounts are designed for everyday expenses. They allow you to easily 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 typically 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 simplify the process. You can both control how much you contribute to the account, and having a separate account for shared expenses can make it easier to track joint spending.
- Keeping business expenses separate: Maintaining a separate checking account for your business or side hustle makes 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
- 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
Reasons to 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.
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 easily accessible.
- 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.
- Automate savings: Many banks allow you to automate savings by setting up automatic transfers from your checking account to various savings accounts. You may also be able to split your direct deposit so that a portion of your paycheck automatically deposits into your savings accounts, bypassing your checking account (and the potential temptation to spend that money).
How many savings accounts should I have?
The number of savings accounts you should have depends on how you plan to use those accounts. For example, 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. Making sure those accounts meet your needs is the most important factor when deciding how many savings accounts to open.
Other factors to consider when opening multiple savings accounts
- Annual percentage yield (APY): The higher the APY, the more your savings 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.
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)
MMAs 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 let you write checks. However, they can also have some restrictions, such as minimum balance requirements or transaction limits.
Certificates of deposit (CDs)
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 and want to earn a return. 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 out of your various 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.
