Why People Have Different Checking Accounts
Is it good to have multiple bank accounts? There are many reasons why you might want to, and we’ll cover some common ones in this article.
February 4, 2022
When it comes to managing money, many of us prefer to keep things as simple as possible. We might have a checking account, a savings account and one or two credit cards. And often, that’s it.
On the other hand, there are some people who have several checking accounts, credit cards, sub-savings accounts and more.
Why do people have multiple bank accounts? Everyone has their own reasons, and there are certainly some situations where having multiple accounts makes sense. But for the average person, is it good to have multiple bank accounts? We’ll explore these topics in the guide below.
Why do people have multiple bank accounts?
There are many reasons why someone may choose to have several bank accounts. Here are some common scenarios.
Using multiple accounts for budgeting
Many financial experts recommend budgeting to get a handle on your finances. This means planning ahead for upcoming expenses and being intentional about how you spend your money.
There are a variety of budgeting methods that can work well for different situations. Many budgeting strategies utilize multiple “buckets” of money: perhaps one for mandatory expenses like rent and groceries; one for taxes, investments and savings; and one for optional expenses like restaurant meals and entertainment.
Some people may find it helpful to keep the money for these categories in separate bank accounts. For instance, you might transfer $200 a month into a “fun money” checking account, which can be used for entertainment, dining out and other nonessential spending, while keeping all your required spending in your primary checking account.
Keeping separate finances from partners
Married couples and long-term partners typically share finances to some extent, but this can look quite different depending on the couple.
Some couples choose to merge everything into one shared account while others prefer to have separate checking accounts. And there are other couples who do both: a joint account for shared expenses and individual accounts for personal expenses.
The tendency to keep separate finances in marriage is more popular with millennials than it has been with previous generations, but every couple has their own approach to managing their finances. There’s no right or wrong method.
Having a high-yield savings account
Many people have their checking and savings accounts at the same bank. Today, interest rates on normal savings accounts are very low, so some people choose to open separate savings accounts at other financial institutions that offer higher interest rates.
For example, high-yield savings accounts (HYSA) may pay around 0.5% interest, while the average savings account interest rate is only 0.06%.
To take advantage of the higher rate, some savers may open an HYSA in addition to their standard checking and savings accounts.
Taking advantage of perks and benefits at different banks
Different banks and bank accounts offer their own unique perks. For instance, one account may provide free international ATM withdrawals, and another may pay higher interest rates on your savings.
There are people who open up several accounts in order to take advantage of a wider variety of these benefits.
Having a lot of money in savings
If someone has a large amount of money in savings, they may prefer to spread out their savings in multiple accounts. This way, if something happens to one account or one bank, all their money is not at risk.
Money in bank accounts is insured by the government through the Federal Deposit Insurance Corporation (FDIC). However, it’s only insured up to $250,000 per account, so if someone has $500,000 in a single account, they could lose half their savings if the bank goes out of business or the funds are compromised.
Owning a business
It’s very important to keep business finances separate from personal finances. Most business owners will have a completely separate bank account for their business.
Likewise, if a person has multiple businesses, they may have one or more accounts for each of those companies.
Earning bank account bonuses
Many banks offer sign-up bonuses in order to attract new customers. For example, a bank may offer new customers $150 for opening an account, depositing $1,000 and completing a few transactions with the new account.
Some people may choose to open new accounts to earn these bank sign-up bonuses. Some may even open several accounts each year specifically to earn these bonuses. This can be similar to credit card churning but focuses on bank accounts rather than credit cards.
Of course, there are other answers to the question of why people have multiple bank accounts. These are just a few of the reasons.
How many bank accounts should I have?
There’s no one-size-fits-all answer to this question. Ultimately, you should consider your financial goals, your lifestyle and your budgeting process to decide if it’s worthwhile to have multiple savings accounts or checking accounts.
For many people, having just two accounts works well: one checking and one savings.
The checking account can be used for day-to-day expenses, incoming paychecks, ATM withdrawals, etc. The savings account can be used for longer-term savings, emergency fund savings and other financial goals.
If you decide to open an additional account, keep in mind that there is usually a minimum deposit amount. How much to open a bank account varies by bank. Ask the teller during the sign-up process how much you’ll need to deposit.
Check out these questions to ask when opening a bank account.
Can you have two checking accounts at the same bank?
Many banks allow multiple checking accounts although this varies by financial institution. Some banks only allow one checking account but allow multiple savings accounts. Other banks may have different types of checking accounts and allow customers to open one of each.
Why do people have multiple bank accounts? It could be that they use several accounts to budget or perhaps they keep finances separate from their partners. It’s also possible that they’re just taking advantage of various perks and rewards from different banks.
Do you need several bank accounts? No. Many people will be perfectly fine with just one checking and one savings account. However, everyone’s financial journey is different — in some cases, it may actually make sense to have several accounts.
Want to learn more about personal finance topics like this one? Check out The Score blog from Tally.