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Currently, I have everything in one bank. Checking/Banking/Investment/Credit cards. In fact, the accounts are linked. It seems to make sense to me because I can manage everything at one place.

However, last night, neither my debit nor my credit card were working at a restaurant. A few things flood into my mind, oh no, my accounts (that are linked to each other) are compromised? Or maybe something went wrong?

In the end, it seems like the bank's network was down (it may just be for minutes, but it happened to be the minutes I was using it). So I started thinking, maybe I shouldn't have everything at one bank and one account?

I'm wondering what other people do and the advantage/disadvantage of each?

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Which country are we talking about? – SMeznaric Jan 23 at 3:28

There are a couple reasons to use more than one bank.

  1. If your deposits are over the FDIC limits (in the U.S.), you may wish to have multiple accounts in order to remain within the protection of the FDIC.

  2. Like you said, stuff happens. It's nice to have a couple debit card or credit cards in your wallet in case of technical difficulties with one of them.

Any disadvantages are minimal and have mostly to do with the hassle of keeping track of what money is with what bank account.

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Also, your bank may be able to take your credit card payment from the linked account, while you are disputing the amount... – DJohnM Jan 8 at 17:37
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I had a bank freeze all of my accounts (savings, checking, etc..) because of a $10 late Credit Card payment (that was also at that same institution). They were kind enough to inform me they didn't charge any late fees (oh wow, thanks!). I only found out my accounts were frozen when I tried to buy groceries. Yes, my fault for missing that $10 payment... but come on! So now I bank someplace else, and make sure not to put all my financial eggs into the same institution. – SnakeDoc Jan 8 at 19:00
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Is point #1 actually valid? I've heard that in the event of a financial crisis, the FDIC will cover up to [limit amount] per person, not per bank account, specifically so people don't try this. – Mason Wheeler Jan 8 at 20:05
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@MasonWheeler The FDIC itself says: "The standard deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. ... For example, if a person has a certificate of deposit at Bank A and has a certificate of deposit at Bank B, the amounts would each be insured separately up to $250,000. " (My understanding is that this was done exactly to encourage people to diversify savings between multiple banks, but maybe I'm wrong on their reasoning.) – apsillers Jan 8 at 20:13
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@MasonWheeler It's per person per bank, so multiple accounts at the same bank are under the combined limit. But if you have $500k split up at two totally different banks and they both seek FDIC protection at the same time, that's pretty much a financial zombie apocalypse. – Rocky Jan 8 at 20:14

Somewhat USA-centric responses here so far. :-)

In the UK you have instant, fee-free FASTER transfers/payments between institutions. This makes it much easier to use multiple banks for your accounts -- though not all UK banks reflect xfers in that quickly (I've yet to find one that doesn't reflect xfers out immediately though!) For example, you can instantly transfer money from one bank's savings account to another bank's current account. I believe the closest thing in the US is ACH transfers, but those take 2 biz days.

Other reasons to have multiple relationships:

  1. The already mentioned avoid of "keeping all your eggs in one basket"
  2. Exposure to mortgage products where discounts apply for having a current account
  3. Different credit card programs and terms (reward points, no foreign transaction fee, etc.) Admittedly, you don't need a bank account for all credit cards, but sometimes the offers come with tie-ins for current or savings accounts.
  4. The already mentioned non-access to your account hassles, but also due to fraud (or possible fraud) on your account. Some banks freeze accounts until the situation is sorted.
  5. I believe you might also have benefits on your credit score from having multiple banks report accounts in good standing.
  6. At least in the UK, having a "proper" joint account seems implausible. So, if married, you need multiple accounts of the same type anyway if your spouse is to build up credit, control their own money, etc., so why not diversify?
  7. In the UK, many accounts offer high intro interest rates, but for limited balance amounts. If you don't mind the hassle of tracking multiple accounts, this money is worth chasing.
  8. Sometimes there are limits on how many xfers you can make between accounts (I've seen this in the US usually tied to high interest savings accounts where the number is 6 per month, but I've also seen it in the UK where it can be lower numbers or no xfers!) so it might make sense to have some money (emergency fund) at another bank for unexpected payments or xfers.

I'm sure the list goes on and on, but that's all I can think of off the top of my head right now.

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As the original poster notes, it is most convenient to have a primary bank, with one's checking account, debit card, and savings account. If you need a safe deposit box, it is convenient to keep it at the same institution. If your primary bank offers a tolerable deal on a credit card, it is also convenient to keep it at the same institution. This allows using on-line banking to move funds between accounts. You can also use teller transactions to pay the credit card bill, or move money between accounts.

As the original poster notes, it is necessary to keep a second transaction account with another institution. In my case, this is a credit card. This means that if there is a question about one account, I can use the other account. This makes travelling much more convenient.

Often, the second institution will have good deals on other products, such as savings accounts or mortgages. Mortgages are large enough transactions to be worth starting a relationship with another institution. On-line banks often have good deals on savings accounts, credit cards, and mortgages. This might let you keep all of your secondary accounts with the same institution.

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