Having multiple bank accounts with different banks: Pros and cons

The more the merrier doesn’t always apply – especially when it comes to bank accounts. We look at whether you can, and should, hold multiple accounts with different banks.

From everyday transaction accounts to interest-bearing savings account, there is no doubt that bank accounts are an essential money management tool. And not surprisingly, 99% of Australian adults have at least one bank account, based on data from the World Bank.

But should you stick with just one account? Or could there be benefits to having multiple bank accounts with different banks? There is no one-size-fits-all answer to this. Here’s what to consider when it comes to having more than one bank account.

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Can I have multiple bank accounts?

There is nothing to stop you having more than one bank account. Potentially, you can have as many bank accounts as you choose. However, there are pros and cons to weigh up when it comes to spreading your money across several accounts with a variety of banks.

The advantages of having multiple bank accounts

Having more than one bank account can offer potential benefits, especially if you’re a saver.

Growing savings for different goals

If you’re saving for different goals, it can work in your favour to have more than one savings account. This ‘bucket’ approach could mean having one account dedicated to saving for a holiday, a separate savings account for a new car or first home, and maybe another account that you only use for emergency funds.

Using multiple savings accounts this way can make it easier to track your progress towards various goals. That said, you don’t have to use accounts with different banks to build savings buckets.  Holding multiple savings accounts with the same bank can make it easier to view all your account balances at the same time.

Earning a high interest rate

If your regular bank doesn’t offer a competitive rate on savings, the solution can be to open a savings account with another bank. There can be a catch to this option though.

Many banks impose a range of conditions in order to earn bonus interest on savings. You may, for instance, be required to make minimum monthly deposits into the savings account or a linked transaction account (with the same bank) to earn the highest rate of interest. If you don’t meet these conditions in a given month, your savings could earn a much lower base rate of interest.

Satisfying all these conditions can be a lot harder if you have several different accounts.

If you plan to use multiple bank accounts to grow savings, it can be worth looking for savings accounts that consistently pay a healthy return without the need to meet various conditions. Some of the highest ongoing savings account interest rates on Canstar’s database pay a high rate with no strings attached.

The downsides of having multiple bank accounts

Each time you open an account with a new bank you will be asked to provide personal ID. This is because banks are required by law to verify your identity. So you’ll need to dust off key documents such as a current passport, drivers licence and Medicare card. While it may be possible to have your ID verified online, the bank may ask you to visit a branch in person as part of the verification process.

While this is a one-off aspect of opening a new bank account, the time and hassle involved is something to bear in mind if you’re thinking about having multiple bank accounts.

Beyond this, there can be other drawbacks to having several different bank accounts.

The potential to pay more in fees

A surprising number of banks still charge monthly account keeping fees on everyday transaction accounts. Canstar found one in four (28%) transaction accounts come with fixed monthly fees, and the cost works out to an average of $6 per month.

This may not sound like much, but if you have two accounts each charging a flat monthly fee of $6 monthly, you could pay around $120 annually. The more accounts you have, the more you could pay in fees each year.

This highlights the value of checking if you could be charged account keeping fees before opening an account with a new bank.

The need to juggle regular payments

Having multiple bank accounts can make it harder to manage your money. This especially applies if you have a number of direct debits in place to automatically pay regular household costs such as rent, loan repayments or utility bills.

Having all these recurring expenses paid from a single account makes it easier to track when bills fall due, and ensure you have sufficient funds in place to cover the payment and avoid any late payment penalties.

Extra admin with multiple bank accounts

Along with the possibility of having to juggle money between accounts to pay bills, having multiple bank accounts can come with extra record-keeping. It means more statements to manage and store, and at tax time you’ll need to report any interest earned on each bank account.

When you may need to have multiple bank accounts

There can be times when it could work in your favour to hold different accounts across several banks. Here are a few examples.

You want to trade shares

If you plan to trade shares, you’ll need to open a trading account with an online broker – and have a linked bank account used to settle trades. While you may be able to use your regular account as the linked account, there can be incentives to open a new account with a different bank. Westpac Share Trading, for example, offers discounted brokerage if the linked account is a Westpac bank account.

You have a lot of cash on deposit

Under the Financial Claims Scheme (FCS), the Australian Government guarantees deposits in bank accounts up to $250,000 per account holder per authorised deposit-taking institution – which covers banks, building societies and credit unions.

It’s not a situation many of us will find ourselves in, but if you have more than $250,000 in cash savings, spreading that money across multiple banks can mean all your money is protected by the FCS – not just the first $250,000.

What to watch with having multiple bank accounts with different banks

Having multiple bank accounts can complicate life a little. It’s not just about extra admin or shunting cash between accounts to manage payments or maximise interest earnings. When you hold multiple accounts with different banks it can become easier to lose track of all your accounts.

It may sound unlikely that any of us would overlook money in the bank, but it happens surprisingly often. Money watchdog ASIC says there is around $1.5 billion sitting in forgotten bank accounts and other unclaimed investments.

A bank account becomes flagged as ‘unclaimed’ if there have been no withdrawals or deposits for seven years.  So if you have a bank account that you use only rarely, ASIC says making as little as a 5 cent deposit or withdrawal once every six to seven years will keep the account off the unclaimed list.

Even so, our financial lives can be complicated enough. Sure, you can have multiple bank accounts, but sticking with one main transaction account and maybe one or two savings accounts might be an easy way to keep your finances clutter-free, depending on your circumstances.

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Cover image source: Worawee Meepian/Shutterstock.com.