In the past, during an economic downturn, there were banks went through an issue that left all its customers unable to withdraw any cash from ATMs or use their cards in stores or online.
Of course, this led to outrage as many people were left unable to make the transactions they needed for their businesses or general living. One guy on TV was interviewed and he explained angrily that he’d had to let his customers down and had been unable to pay for a big meal he and his family had ordered.
I found it hard to feel sorry for this guy though, as while he spoke all I could think was ‘you had both your personal account and your business account with the same bank? And you don’t any other bank accounts you can access from a different company? To be honest, that’s just stupid.
You may now be reading this and feeling either jinxy or insulted. Maybe you have only one bank account and have been using it just fine for the last ten years? Well, that’s fine if you want to carry on taking such a big risk, but there are many ways you could be much safer and save yourself a lot of money and stress by having two accounts. Here we will look at why it’s so important to have multiple accounts with multiple banks.
Reasons to Have Multiple Bank Savings Accounts
Many people know that in the financial world, the standard accounts that most adults acquire are the checking and savings accounts. Checking accounts and savings accounts are the standard fares 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 the top 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 the bank crisis. To protect yourself keep assets at different accounts.
Though fees may seem like an 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 of 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 transfers 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.
Of course, the most obvious reason you should have more than one account is that things like the above happen. Natwest isn’t the only bank that’s ever had that kind of problem, but likewise, you will find that often there are problems with personal accounts that prevent just you from getting your money out – whether it’s because your bank believes your card to be stolen and freezes your access, or whether it’s because you sat on your card and snapped it in half. Either way, if you have a back-up card for a completely unrelated account – or two – you’ll never be unable to access any money at all.
If you have all your money with a single bank then that presents a serious security risk. It would only take for you to lose that card, or for someone to get your details and you could lose all the money you own. With multiple accounts, you can be sure that will never happen though, so this is a much more sensible way to keep your cash safe. This also protects you against the unlikely scenario that your bank closes down.
Having multiple accounts makes your money much easier to keep track of and is great for budgeting. Get paid into one account and you can then set up standing orders to move some of that money into a savings account or a ‘personal allowance’. That way you will never go over budget and not have enough for your bills and you’ll be able to easily save whatever amount you need.
Different bank accounts have different benefits. Some have great online banking features, some have super high interest and others let you withdraw money abroad for free. By having lots of accounts you’ll get to enjoy all these benefits at once.
Creating a Savings Account Despite Your Debt
If you have a lot of debt, then you may wonder what the importance of having a savings account would be. After all, if you could afford to save money, then you would be able to pay off that debt, right? Well, that’s not necessarily true. It’s important to have a savings no matter what, as it’s likely that you accrued a considerable portion of your debt due to the fact that you weren’t prepared for a financial emergency when it happened. For example, you may have racked up hundreds of dollars on a credit card fixing your car, and that would not have been necessary had you had a savings account to back you up. Those car repairs will end up costing you much more than they would’ve had you paid cash. Now, do you see the importance of savings, no matter what? Here are some pointers for creating a saving account despite your debt:
Shop around. First off, you must realize that not all savings accounts are created equal. You want your money in savings to work for you while you are not using it. How does that happen? You need to find interest-bearing savings account with as high a return as possible. Usually, savings accounts offer only minimal interest returns, but it’s possible to find savings account specials that will pay you upwards of five percent interest at least for the first year, as a bonus for signing on. Shop around for your savings account, and find one that pays you.
Cut the credit card. Chances are you have been using your credit as a makeshift saving, meaning credit has been your standby for getting out of financial tight spots. All this method does is get you further and further into debt. Commit to relinquishing this habit – and today.
Prioritize your savings. Once you set up a savings account and stop using credit as a savings substitute, it’s time to begin growing your savings. Work your monthly savings stipend into your budget the same way you would any of your other monthly expenses. Every little bit counts, so every little bit you can contribute to savings needs to go into savings – period.
Once start building your savings and watching it grow with interest, your debt situation doesn’t haven’t have to feel so overwhelming. No one likes to be in debt; however, most people get there the exact same way. Do what you can to reverse your debt habit now by creating a savings habit, and watch your financial well-being take a turn for the better.