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Author: Don Obrien

3 Reasons Why You Should Be Wary of Using Just One Bank


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Consolidating your finances into one place can make managing your money much easier. You won’t have to keep track of different log-ins or accounts, and you can use your preferred bank’s digital app to see everything in one place.

And, if you’re like many Americans who have been with their bank since they were young, it can feel intimidating to leave the financial institution you’re most comfortable with.

However, there are several reasons you should consider spreading your finances across several different banks.

Right of offset

The right of offset is the right for banks and credit unions to take funds from your deposits, and pay off a debt you may be late or delinquent on.

For example, if you have a checking account and auto loan with the same bank, they have the right to pull money directly from your checking and apply it to the balance on your auto loan.

Banks have the right to do this without notice, but each bank and state also has specific requirements and limits they must abide by. For example, Federal law restricts federally chartered banks (i.e. JPMorgan Chase and PNC Bank) from using the right of offset to collect on revolving debts like a credit card.

Glenn Migliozzi, lecturer at Babson College, says the right of offset should be a concern to consumers, and should be one of many reasons to have more than one bank account. He recommends that since most bank accounts and services are now free, it doesn’t hurt to have accounts at multiple banks, making it a great way to protect yourself against banks potentially invoking the right of offset.

Theft issues can become an even bigger problem

Migliozzi added that splitting your banking relationship will mitigate your overall risk for theft.

According to GIACT, a payment and identity fraud prevention company, 38% of U.S. consumers experienced account takeover in the last two years. And yes, while having two accounts can technically double your chances, it can also prevent major headaches and stress if a malicious account takeover does occur.

If you have one checking account and it becomes compromised, you could run into a myriad of issues, including your bills not being paid on time, which could cause an even larger problem and potentially affect your credit score. To combat this, a credit monitoring service can keep track of any activity regarding your credit or financial products. Select rated CreditWise® from Capital One the best overall credit monitoring service, and you do not need to be a Capital One cardholder to use the service.

By splitting your cash into a couple of accounts, you’ll at least have one account to fall back on if there are issues with another. Additionally, if you have over $250,000 in cash, you will want to keep your money with multiple institutions to ensure you have full FDIC insurance coverage in case your bank fails.

Meet multiple savings goals

For many Americans, they have several savings goals. It can be as simple as a new cell phone, or as large as purchasing a home.

By utilizing different bank accounts, you can prioritize funneling your money into different ‘buckets’ to help accomplish your goal in a more regimented fashion.

After you have opened and established more than one bank account, you can have your money dispersed in a few ways.

  • Check with your employer to see if you can have more than one bank account for your direct deposit. If so, you can have a set allocation of how much money you want sent to each account.
  • Within your primary checking account, you may be able to schedule transfers to an external account. By doing this, you can automate your progress towards your savings goals without thinking about it.

Study after study proves that you are much more likely to achieve your savings goals by automating your finances. And by having separate accounts, such as a high yield savings account like the American Express® High Yield Savings Account or an IRA from Charles Schwab, you’ll be less likely to dip into money that’s set aside for a specific goal.

Bottom line

It’s understandable why many Americans don’t switch banks. It can be viewed as a hassle with little upside. However, by having more than one bank account, you can try different institutions to see which one fits your needs best, and even possibly become your primary bank. It doesn’t affect your credit to open a new checking or savings account and you can possibly earn a cash welcome bonus from your new bank along the way.

One bank may have a high-yield savings account with a better interest rate while the next credit union you join may have a budgeting platform that you prefer.

For most consumers, banking with more than one institution can be another useful tool in their kit towards building their financial future.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.



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