How Many Checking Accounts Should You Have?
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These days, it seems like juggling multiple things at once is part and parcel of modern life. Whether it be growing screens that we stare at for hours while texting on our phones, or trying to work while streaming a movie in the background. In the world of personal finance, sometimes juggling too much can be to your detriment. So, how many checking accounts should you have? Is that 7th checking account you were planning on opening way too much? Let’s break it all down.
In this article
How many checking accounts should you have?
At least one; is the easy answer. There’s no one-size-fits-all rule, but opening several checking accounts can help improve financial organization and make things flexible from a money standpoint. For example, a high-yield checking account is useful for earning more on account balances, while an account without monthly fees can keep costs low which is good for daily transactions. People find that using separate accounts for different goals, like everyday spending, saving for savings goals, and managing emergency funds, provides clarity. That being said before opening multiple accounts, make sure it's not too many you can handle. Losing track of funds, fees, and other things can be a drain.
Why do people open multiple checking accounts?
- Budgeting and expense management. Having different accounts for essentials, discretionary spending, and savings helps track spending accurately and avoid overspending.
- Emergency fund. Reserving one account only for emergency savings helps you avoid dipping into everyday funds.
- Large purchases. It is smart to have an account only for large expenses, particularly one in which you can earn solid interest on purchases.
- Business finances. A business checking account allows freelancers and small business owners to separate personal and business expenses, streamlining tax reporting.
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Types of checking accounts
When setting up multiple accounts, it’s essential to know which types are available and their specific perks:
Type of Checking Account | Description |
|---|---|
High-yield checking account | Designed for those who want to earn higher interest rates on their balances, often available through online banks or credit unions. |
Checking account without monthly fees | Accounts that lack maintenance fees and monthly fees, ideal for budget-conscious users. |
Bonus checking account offers | Some banks provide cash bonuses or cash back offers for opening new accounts with direct deposits. |
Business checking account | Essential for self-employed individuals, this account helps keep personal and business finances separate. |
Joint checking account | Suitable for couples or partners who need to manage shared expenses, like rent or utilities. |
Online banks and credit unions | These institutions often provide higher APYs and fewer fees, attracting those who want higher returns without added costs. |
Benefits of having multiple checking accounts
Better financial organzation
Managing checking accounts with separate purposes can simplify budgeting and help keep track of account balances. For example, you might use one account for fixed bills and another for variable expenses, like groceries or entertainment, to avoid overspending.
Better tracking for savings and specific goals
Opening dedicated accounts can support specific goals or large expenses. In other words, it can be much easier to plan with multiple accounts serving specific purposes. For instance, keeping a high-yield account exclusively for an emergency fund or certificates of deposit (CDs) for long-term savings helps prevent mixing funds intended for other uses.
Protection and security
With FDIC-insured accounts, spreading money across different banks can improve deposit security. In fact, the famous basketball player, Giannis Antentekoumpo, was famous for putting his money in over 50 different banks, just for the FDIC security aspect! Each account is protected up to the FDIC limit, which is particularly beneficial if you have substantial savings. Many financial institutions prominently feature the member FDIC label to indicate this coverage.
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- No account fees
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- Up to $2M of additional FDIC insurance through a network of participating banks.
Is it bad to have multiple checking accounts? Potential downsides
It can be bad to have multiple checking accounts, particularly if those accounts are causing an admin headache. Here is some of what you need to watch out for.
Potential fees and minimum balance requirements
Some banks require minimum balance requirements to avoid fees. If you spread your funds across multiple accounts, it might be difficult to maintain the necessary balances, leading to account fees.
Complex account management
Juggling multiple accounts can lead to overdraft fees or missed payments if not closely managed. Additionally, managing accounts across different banks requires tracking login credentials and ensuring each account meets financial needs.
Risk of overspending
While having separate accounts can be useful for an organization, it also poses the risk of overspending if certain accounts feel like "extra" money. Avoid treating every new account as discretionary spending unless intended for that purpose.
Examples of multiple checking accounts
Remember, having multiple checking accounts that all serve a specific purpose and are well-tracked can be a huge plus when it comes to financial management. Below are two examples of people who use multiple checking accounts for different things.
Example 1: Samantha’s setup for personal and emergency funds
Samantha, a makeup and hairdressing professional in her 30s, uses 3 accounts to organize her finances and reach specific goals:
- Personal checking account: Samantha has a standard checking account for daily expenses. While the interest rate here is low, averaging around 0.08% APY, the focus is on easy access for transactions like debit card purchases and online bill payments.
- High-yield savings account: For her emergency fund, Samantha chooses a high-yield savings account offering up to 5.50% APY. This higher interest rate allows her emergency savings to grow, giving her a financial cushion without needing frequent access.
- Bonus checking account: Samantha also set up a bonus checking account dedicated to saving for travel. This account offers cashback or bonuses for meeting specific criteria, like setting up direct deposits. With some bonus accounts offering up to 5% APY, Samantha can grow her travel fund faster, leading to her getting the most from her money.
- This setup works well with Samantha’s financial goals, using specific accounts for everyday spending, emergencies, and travel to keep her budget organized and on track.
Example 2: Mike’s business and personal finances
Mike, a self-employed contractor, structures his finances differently to separate his business and personal expenses effectively:
- Personal checking account: Similar to Samantha, Mike also has a standard checking account for his household expenses. While his APY is around 0.08%, his primary goal is accessibility for daily spending rather than high returns.
- Business checking account: Since Mike is self-employed, he keeps a separate business checking account to manage his client deposits and business expenses. Although business checking accounts typically don’t offer high interest, they provide essential features like invoicing, payroll support, and expense tracking, which are invaluable for keeping his business organized and tax-ready.
- High-yield account for discretionary spending: Mike also has a high-yield account dedicated to discretionary spending. Although he doesn’t use this as a primary savings tool, the higher interest rate (up to 5.50% APY) helps his money grow while being reserved for non-essential purchases.
By choosing accounts that more or less match his personal and business needs, he takes advantage of high-yield rates for discretionary spending, and business and personal accounts for day-to-day transactions.
Better banking is here.
- No account fees
- Earn up to 4.20% APY
- Up to 2-day-early-paycheck
- No-fee Overdraft Coverage.
- Do it all in one app.
- Up to $2M of additional FDIC insurance through a network of participating banks.
How to decide on the right number of checking accounts? Evaluate your financial situation
Take a good hard look at your money situation. Think about your income, your credit score, and what you want your money to do for you. Are you paying bills, saving for something special, or just trying to keep things simple with no extra fees? Each of these goals can help you figure out what kind of checking account (or accounts) you might need.
Consider short-term and long-term needs
Do you need money ready to buy your staff a bunch of lattes on Monday morning, or are you also saving for that dream vacation in Costa Rica? For short-term stuff, a regular checking account works great. For bigger goals, maybe look at a money market account or a CD to stash your cash while it grows over time. Balance it out; one for now, one for later.
Look for perks and interest rates
Why settle for less when some accounts give you bonuses? Hunt for accounts that offer high APYs (fancy talk for "better interest on your money") or even cash incentives for signing up. Got a business? Look into options that cater to business owners—extra perks might be waiting for you there.
Check account fees and minimum balances
Nobody wants to lose money on fees! Compare your options and see which accounts skip the monthly charges or have low balance requirements. Plenty of banks and online options let you manage your money without eating into your savings, so don’t settle for accounts that cost you unnecessarily.
Pros and cons of having multiple checking accounts
Managing multiple checking accounts can offer unique benefits, but it also comes with potential challenges. Below is a quick look at the advantages and drawbacks to help you decide if maintaining multiple accounts aligns with your financial goals.
Pros
- Improved budgeting. Separate accounts support better money management and help avoid overspending.
- Dedicated savings for specific goals. Having an account for savings goals ensures funds aren’t used for everyday expenses.
- Enhanced security with FDIC coverage. With multiple FDIC-insured accounts, funds are protected up to $250,000 per depositor per bank.
Cons
- Complex management. Handling multiple accounts requires close attention to details, including withdrawals and deposits.
- Possible fees. Banks often charge fees for additional accounts, which can add up.
- Risk of neglect. Unused accounts may incur low balance or inactivity fees.
The debit card with up to 2% cash back on purchases
- Maximize your rewardsNo monthly fees
- It's quick, easy, and free to open an account
- Get paid up to 2 days early with direct deposit
- No Overdraft Fees
- 1% cash back on debit purchases
How to manage multiple checking accounts effectively
If you decide to open multiple checking accounts, implementing a few key strategies can help keep them organized and make managing your finances easier. With the right approach, you can ensure each account serves its purpose effectively without adding unnecessary complexity:
- Use a budgeting app. Linking accounts to a budgeting app can simplify tracking balances, transfers, and expenses.
- Automate direct deposits and bill payments. Set automatic deposits to support savings and minimize manual transfers.
- Monitor APYs and interest rates. Stay informed on rate changes for high-yield accounts to maximize returns.
Personal and business checking account alternatives
There are of course alternatives to checking accounts. In fact, there are accounts that pay better interest with terms that are more or less more flexible. Some of these are as follows
Money market accounts
Money market accounts combine features of both checking and savings accounts, offering higher interest rates while still allowing you to write checks or make transfers. For example, if you’re saving for a down payment on a car but still want access to your funds for emergencies, a money market account can provide a good balance of earning potential and flexibility.
Certificates of deposit (CDs)
Certificates of deposit are savings tools with fixed terms and guaranteed interest rates. For instance, if you know you won’t need access to a chunk of money for a year, putting it in a 12-month CD can help it grow more than it would in a regular savings account. Just keep in mind that accessing the funds before the term ends could result in penalties.
Credit union accounts
Credit union accounts are a great option if you’re looking for lower fees and better rates compared to traditional banks. For example, if you have a tiny balance but still want to avoid monthly fees and earn interest, joining a credit union might provide more favorable options than a typical bank checking or savings account.
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Writer
Benjamin is a writer and entrepreneur who spent 15 years in Asis involved in the real estate and financial services industry. He currently writes about finance, real estate, geopolitics, and short stories involving his cat from Argentina named Tuki. He has written for The Motley Fool, SuperMoney, and other online and offline publications spanning the globe.
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