Banking is a competitive field. With so many available offers, it can be hard to choose where to put your money.
Most financial institutions offer the same basic accounts.
For example, you can usually find checking accounts and savings accounts at most firms.
There's no doubt it's convenient to keep all your accounts in one place. But, is it really the best financial solution?
The answer will vary from person to person. The right move for you might be different from that of your friends and family.
To make the best choice, review the pros and cons of consolidating your accounts.
The Case for Account Consolidation
There are some clear advantages to keeping all your accounts at the same financial institution.
The most obvious benefit of keeping your accounts at the same firm is convenience.
When you have all your accounts in one place, it’s simple to keep track of all your assets and to manage your accounts.
Most firms offer online account access.
This can make it easy to see your entire financial picture at a glance if you log on to your firm’s website. Having your accounts at the same firm also makes online transfers a breeze.
With all your assets at one firm, you can receive a consolidated statement of your account.
This will show your assets and liabilities in an easy-to-read format. Most statements will track your investment performance and even your net worth.
With assets at different firms, you’ll have to do most of those calculations yourself.
Relationship banking benefits
Keeping your accounts at one firm may qualify you for better financial terms.
For example, Wells Fargo offers lower interest rates on many types of loans if you have a banking relationship with them. For the most part, all you have to do to qualify is to set up automatic payments and link a Wells Fargo checking account.
Consolidating all your assets at one bank can also qualify you for various fee waivers or entitle you to a higher level of service.
At Bank of America, for example, relationships are divided into three tiers. With greater balance across their accounts, customers can get a higher money market rate, bonus credit card rewards, mortgage origination fee reductions, and auto loan rate discounts, and more.
Edge on customer service
When you bring a large amount of business to a single bank, there's more incentive for the bank to keep you as a happy customer.
This means you can contest occasional fees and charges and have them waived.
It may also command a more dedicated level of customer service when addressing issues such as fraudulent activity.
The Case Against Account Consolidation
The benefits of having all your accounts at one firm can be significant. But, there may also be important drawbacks.
No one-stop shops
Most financial services firms try to be everything to every customer.
However, the truth is that there is no one bank that is the best at absolutely everything.
If you put all your assets in one bank, you’re likely missing out on better rates or services elsewhere.
Most national banks, like Chase or Bank of America, are reputable firms that offer a wide range of services. However, national banks typically offer very poor interest rates on savings accounts.
Now, you might not need a high savings rate, or you might prefer dealing with a national, bricks-and-mortar bank, and that’s fine.
The point is that if you shop around, you’ll see that you can get different rates at different places.
Account fees can vary wildly from one financial services firm to another.
For example, Wells Fargo charges a fee for its Everyday Checking account that you can only avoid through either direct deposits, debit card usage, or a minimum account balance.
Many other banks don’t have any checking account fees at all, including Capital One’s 360 Checking Account.
The same is true when it comes to your investments. Full-service brokerage firms may charge you hundreds of dollars in commission for a single trade.
Outfits such as Robinhood charge zero. More mainstream investment houses like Fidelity charge just $4.95 per trade.
FDIC insurance limits
The Federal Deposit Insurance Corporation insures depositors up to $250,000 “per depositor, per FDIC-insured bank, per ownership category.”
For example, if you have a single bank account, a retirement account, and a corporate account at the same FDIC-insured bank, each of those categories is insured up to the $250,000 limit.
For most savers, that limit is more than enough. However, if you have a large amount of assets, that $250,000 insurance might be inadequate.
You can sidestep that limit by having assets at different firms. You’ll get a new $250,000 limit per account type at every bank where you hold assets.
Lack of diversification
Diversifying your investments is a sound investment principle.
Diversification helps protect you from greater losses in the event that things turn sour in one area of your investment portfolio.
The same is true when it comes to financial services firms. Although most firms are solid, with governmental restrictions in place to help maintain solvency, the truth is that sometimes things turn sour.
Investment professionals recommend against holding more than five percent in a single stock.
In a similar vein, if you’ve got your money spread out among different banks, you won’t have to worry about a disaster at one firm costing you all your assets.
Why You Might Consider Multiple Firms
There are many reasons why choosing more than one firm for your accounts makes sense.
The primary reason is that each bank offers its own rates and fee policies.
When you shop around, you might find that some banks are very good with certain types of accounts or products.
But typically, they can’t provide the same world-beating rates and service with other types of accounts.
When it comes to checking accounts, for example, some firms have high fees while others have none.
Many banks charge as much as $5 to access an out-of-network ATM.
Other banks offer superior ATM access. The Charles Schwab High Yield Checking Account, for example, offers investors unlimited ATM reimbursements, even for overseas withdrawals.
The same variations can be found when it comes to savings accounts, with some firms offering lower fees — or higher interest rates — than others. Even if you open a Charles Schwab High Yield Checking Account for its ATM fee structure, for example, you might find higher savings rates at other banks.
Credit cards are another big differentiator. Small firms, such as credit unions, might not even offer credit cards.
Big, multinational banks like Chase, for example, may have multiple credit cards for you to choose from. You can often get generous rewards just for signing up.
Loans can be a mixed bag. You can often get a lower interest rate on a loan, such as a mortgage, if you already have a banking relationship with a firm.
However, you can also rate shop and find competitor banks that may offer lower loan rates than you can get even with a relationship discount.
Which Is Better?
As with many financial decisions, the best course of action depends on your personal financial situation.
Consolidation is certainly convenient. Keeping an organized financial life might be the most important factor to you.
Getting the highest rates on investments might be more important for other investors. Still, others might seek out the lowest fees for services.
Either of these might trump the benefits of having assets under one roof.
Depending on your needs, the relationship benefits a bank offers might offset any negatives of keeping all assets at one firm.
For example, saving 0.25 percent on a $500,000 mortgage can be significant. For some investors, this savings could offset earning a low savings rate.
The bottom line is that where to keep your assets is a matter of personal preference.
The important thing is that you weigh the pros and cons of keeping money at the same bank. If the scales tip in the direction of asset consolidation, that’s fine, and it might be the best thing for you.
Maximizing your money might mean keeping different accounts at different banks.
Diversifying your exposure means you’re more likely to get the best rates for every type of account you have.
With one bank, you might get high savings rates.
Another might offer low checking fees.
Other banks might offer low brokerage commissions or the best loan rates.
Remember, you’re never locked into a particular account at a specific bank — or at least, you should never agree to be.
Financial services is a competitive market. Banks are constantly coming up with better offers to attract new clients.
The bottom line is that you should never be afraid to put your money where it works best for you.