Why I Keep Money in 4 Different Banks and Love It!

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Why I Have Money in four Banks

I’m sure I’m going to get a few people that say I’m paranoid or a little crazy and I’m OK with that. It’s true, I keep my money in a variety of bank accounts for a number of reasons. I wanted to explain why I do it and why I think it should be a more common practice than it is. My obsession with using different bank accounts didn’t start until after I paid off my credit card debt and was on the road to financial recovery. I was going through a lot of changes, but my money still sat there in one bank account.

My savings were growing, my investments got started, and I was trying to build up my net worth. After hustling for four years to kill my debt, I had to switch my mindset into building wealth and saving for retirement. It was a different game and I didn’t think much about my bank account and the money sitting in there. So, lets get down to what I’ve done over the years to diversify my money into different bank accounts (4 to be exact) and why I did it.

My Money and My Banks

Ever since I had a bank account, it was with a big time bank. I started with a savings account my parents created for me and then opened a checking account when I got a job at 15. I added all of my income into that account and  put my savings in my little savings account. I was doing what I was supposed to. I never thought much about it and just kept running through the story we call life with my one lonely bank account.

When I got married, we decided to open a joint checking account and that signaled that I would move over my bank accounts to our new bank. This was just another big bank, but my wife had more going on in her account, so it was easier for me to do the move. Again, we moved from one big bank to another. And if you want to know, we didn’t combine all of our money. We both still had our own checking accounts and a joint account. You can read more about why here.

Fast forward eight years and now we still have our big bank accounts, but I’ve also added a few more to my plate. Let’s see what I have going on under the money hood.

Big Bank – Checking account, Joint checking account, credit card

Credit Union – Checking account, 4 savings accounts (basically buckets)

Digit – this is where I put my automatic savings, which Digit opens for you.

Capital One 360 – checking account and two savings accounts (also buckets)

Now, these are just my bank accounts. I also have money tied up in investment accounts sitting in Betterment, Scottrade, Motif Investing, and Vanguard.

To say I have money all over the place might be an understatement, but I have a reason for my madness.

Why So Many Bank Accounts?

I could come up with a few different reasons why I have different bank accounts, but let’s first say this isn’t to hide money from my wife or anyone else. I’ve very open with my wife about how much money I have in my accounts. No shenanigans going on over here, so don’t even go there!

Basically, there are two main reasons why I have different bank accounts. One is security and the other is based on goals. Let’s talk about goals first and then we’ll jump into security.

Many Goals = Many Accounts

Let’s face it, if you’re into saving, then you need to get out of big bank accounts. Their savings rate is something like 0.10%, which is paltry and downright embarrassing. They sit there and use your cash to fund loans at 6.5% and then give you some little 0.10% interest kick back. No thanks big banks!

One of my big goals during paying off debt was also to save money. Because of this, I wanted to earn something for my trouble. As noted, my big bank account was giving almost peanuts for saving, so I looked at different alternatives. I came across Capital One 360, which was an online bank offering nearly 1% back when I signed up. It was a no-brainer and the signup process took only a few minutes. Their savings account rate is still competitive and much more than big banks, so that’s why I still have that account.

As I learned more about personal finance, I realized I was missing the boat when it came to Credit Unions. They had been growing in popularity and I wanted to get on board. They are for their members (account holders) and they give excellent service, good interest rates, and even better loans. I opened an account at a credit union who wasn’t local, but was part of a group that offered membership. To be a part of a credit union, you need to be a part of a group they service. Many allow you to purchase membership to get in and then you can become a member.

At my credit union, they give me interest-bearing checking and good savings accounts. I opened my account to earn interest on the money sitting in my checking account. If I’m going to use they money often, then why not earn something to use a checking account? Big banks don’t offer that at all. I also created four different savings accounts, which they call e-savings accounts. I used these for different goals like buying a Jeep, taxes, and a few other things. It was easy and allowed me to see the money I had in each account.

My goals don’t stop there. Recently I learned about Digit, which automates your savings, and it rocks my socks off. I love me some Digit and if you want to save, you should try it out. It’s completely free. You don’t earn interest on your account, but that’s not the reason for it. The purpose is to see that you can save money when you think you can’t. I know many who have jumped on Digit and they have saved thousands with no effort. If you’d like to see if you have room in your bank account to save, check out Digit.

Digit opened an account for me and when I have money in there, I just take it out and put it in one of my interest-bearing savings accounts or throw it into my Betterment account. Just depends on what I want to accomplish that day. Easy peasy!

Security is a Big Concern!

OK, here is the nitty gritty of why I have multiple bank accounts and I think you should too. Security is a big issue these days. People are getting their identities stolen left and right, but bigger than that is credit/debit card fraud. With the explosion of online shopping, more and more are using their bank accounts to buy stuff online. Trust me, I’m one of them, but I don’t want my stuff stolen from me. Who does?

According to the Nilson report, over 48% of all credit/debit card fraud was done in the US. Fraud also accounted for $16.31 billion on loses in 2014. This is a scary number and I’ve been on the receiving end of credit card fraud a few times. How did they get my information? Not sure, but I’d assume it was a loose website that didn’t keep up with the standards. Every time we turn around a new site or company has been hacked. Remember the Target hack? That was a big one, but the happen almost every week or even more that we might not know about.

So, what does this have to do with having multiple bank accounts? Easy. The harder you make it for someone to steal your money, the easier your life will be. Let’s show an example.

Let’s say I have all of my dispensable cash sitting in a big bank checking account. This is money I need to pay my bills, feed my family, and live my life. Now, I head over to a website to buy a cool new toy for something. I go through the checkout and pay with my Visa branded debit card from my big bank.

A few days later I get my new toy, but I also see a charge on my account that I don’t recognize. After looking at it, I realize my bank card number has been stolen and is being used to buy stuff I didn’t authorize. Unfortunately, they have already drained my account. I have to call the bank, freeze the account, and they have to work on getting my money back. This takes time and is not immediate. In fact, it can take a few days to even a few weeks in some cases. That’s a long time without access to your money.

The worse part is my mortgage payment is due that same day and I don’t have any money to pay it. Oops. That’s where the problem comes in.

Since I carry my money in different bank accounts and one gets compromised, they can only get access to that one. They can only take money out of one account, but I have money sitting in three other accounts. This gives me the peace of mind that I will be OK if faced with an emergency. I can still pay my bills, feed my family, and take care of life.

Truth be told, if someone gets a hold of your debit card, you can be responsible for some of the losses if you don’t report it fast enough. These terms are with every big bank. This is why I tell everyone to ONLY PAY WITH A CREDIT CARD ONLINE. Seriously, don’t use your debit card online. It’s not worth the hassle. If someone steals your credit card, you just have to call and they take care of it. No money out of your pocket and nothing missing from your bank account.

Now, I know not everyone can use a credit card or even get one. I get it, so that is why I’m adamant about having different accounts at multiple banks. Disperse your money in different accounts and make it harder for someone to steal all your money. It’s not hard to do and it’s free with almost every bank to setup a new account. Just think about it for a few!

How Do I Keep Track of All My Money?

I wanted to throw this in there because I’m sure you’re thinking that I have to log into every account and check the money in there. That would be a hassle, but I don’t do that at all. I don’t have to. I manage all of my bank accounts, investments, bills, and everything else regarding my money with my free Personal Capital account. It’s like Mint.com, but better in my opinion. It’s 100% free and it gives me a birds-eye view of all of my money, my financial health, and even how well my investments are doing. It’s my number one money tool that I’ve been using for years.

I just have to log into my Personal Capital account and then look at all of my financial accounts. I can even see my credit cards there to see how much I owe each month (I use my credit cards for almost every purchase and then pay it off every month). That means just one simple login and a view of all of my finances. Nice!

So, there you have it my money friends. There are the reasons why I have money in four different banks and why I suggest you do it was well. You don’t need four like me, but at least diversify your money based on your goals and try to earn some interest on that money if you can.

How many bank accounts do you have?

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  1. Money Beagle says:

    We have four different accounts, as well, but ours could likely be dropped by at least one with no issues. The one that could be dropped is open mainly out of habit. At one point it used to offer an interest rate that was 1-2% higher than even the best bank we had otherwise…obviously this was back when interest rates were actaully rewarding to savers, so it’s been a few years! Now, it offers no better rate at all, so I suppose we could and probably should close it as it’s just one less thing to deal with.

  2. Visa fraud protection is the exact same for debit cards as credit cards. Credit cards are horrible products and identity protection security by having one is a myth. Make a call to the credit card company and they erase the fraudulent charge. Make a call the the bank and they deposit deposit the amount of the fraudulent charge. Behaviorally, having a credit card for that reason is dangerous because then needing a bass boat becomes an “emergency.” No thank you.

    1. Yes, Visa does offer the same benefits, but what you’re forgetting is the money is already out of your bank account. Trust me, I used to work at a bank and those investigations took up to a week in some cases, where the money was not deposited right back into your bank account. You can call the bank all you want, but once that money is missing out of your checking account, it can take some time to put it back. Also, if you don’t catch it for some time, many big banks have policies that you could be liable for up to $500 of the fraud. This I know well as I’ve had friends have this issue with debit cards. Credit cards offer you the protection of not having money being removed from your account. If you can’t use a credit card wisely, then don’t use one. I know many, including myself who know how to use them for their purpose. Heck, this is from a guy who used to have over $50,000 in credit card debt. That was four years ago and I use my credit card every day for every purchase and don’t buy bass boats or things I can’t afford. Sorry you feel they are horrible products, but make sure you tell that to the people who use them successfully every day and earn great rewards and don’t have to worry about their money being extracted from their accounts when fraud happens. There are hundreds, if not thousands of articles, telling people to use credit cards when shopping online and fraud is the main reason. It takes banks too much time to get their ducks in a row and I’ve never seen one that has deposited the money right back into your account. They have to investigate.

  3. I only have two bank accounts and am planning to have another bank account for another purpose. Thanks for recommending Personal Capital. I’d check this out and hopefully this would help me manage my accounts.

  4. I completely agree with your reasoning of multiple goals, multiple accounts. This is the premise behind the ‘envelope system’ as well.
    And credit unions are an amazing place for higher savings interest, and lower loan rates.
    However, I disagree with your ‘safety’ argument, especially since you use something like mint.com which can be/ and some of these have been hacked. You lump everything into one software, which itself can be hacked, defeats the point of having all those accounts.

    1. While I do use a service like Mint, they only use read-only access to your account and the usernames/passwords are hashed in a system that you wouldn’t be able to hack into and dicypher with brute-force in most cases. There have been no reports of hacking where stolen passwords were found due to brute force, but yes, some of the accounts have been hacked. Those were due to weak mint passwords and that is on the user. I’m not worried about using these types of services. I completely understand the security technology behind these services and how the passwords are stored.

  5. Agree completely. I have always banked through different banks depending on the advantages of their products/rates etc. I never feel save having everything in one place and I split different products depending on each financial goal. Thanks for the tip about Digit. Maybe I’ll give them a try. Cheers.

  6. William Jones says:

    Digit seems interesting. But I think I would rather be in charge than have it done for me automatically. Kind of scary.