One of the many consequences of the Federal Reserve's aggressive series of interest rate hikes since March 2022 has been a sharp increase in the yield you can earn in your savings deposits. Today, the top high-yield savings accounts pay an annual percentage yield (APY) of 5% or more, while rates on the top money market accounts are as high as 5.25%.
If you currently have a single account that does not match these payouts, it may be time to consider opening a new one or a secondary account—even if that means turning to a new bank or credit union.
Key Takeaways
- Today, the best high-yield savings accounts pay an APY of around 5% or more.
- If your current savings account isn't offering competitive rates, opening a second account at a different bank or credit union could be a smart option.
- Multiple accounts can offer you additional FDIC coverage, and help you achieve specific savings goals.
- There should be little to no impact on your credit score for opening multiple accounts at different financial institutions.
Benefits of Multiple Savings Accounts
The current high-rate environment represents an ideal opportunity to reevaluate your savings plan. If you've been stashing your savings deposits in the same account for at least a few years, it's worth checking that the current APY you're earning is competitive with today's top rates.
Opening multiple accounts could be one way to ensure that you're maximizing the potential of your savings by earning the top yield. The flexibility of having more than one account can also help you manage fluctuations in interest rates, which could be important when the Fed eventually pauses its hikes and rates begin to move lower.
In addition, by splitting your savings into more than one account, you boost the amount that can be covered by the Federal Deposit Insurance Corporation (FDIC). The FDIC guarantees your deposits up to $250,000 per individual per institution, so opening several accounts can multiply the deposits that you're entitled to have insured.
Holding your savings in multiple accounts can also be a way to help you stay on track to meet specific goals. For instance, if you're saving for a down payment on a house, you could open an account where you set aside money specifically for that purpose. This could help you avoid the temptation of spending these funds on other things.
Some banks and credit unions may offer bonuses to incentivize your deposits and loyalty programs to reward you for your banking relationship. Shopping around and opening several accounts can help you take advantage of these opportunities to make the most of your savings.
How to Manage Multiple Accounts
The process of opening a new savings account—or another interest-bearing deposit product like a money market account (MMA) or a certificate of deposit (CD)—is quick and easy. At online-focused financial institutions as well as the big-name traditional banks, you can often open an account with your computer or mobile device within a few minutes. All you'll need is your ID, Social Security number, and some other basic personal information.
When it's time to transfer money into your new account, the process is also relatively painless and simple. You should be able to move funds between your accounts with no more than the routing number and account number. Once you've linked your accounts, you can easily transfer money back and forth, making adjusting and managing your savings plan simple.
However, when you request an electronic transfer, your funds can take one to three days to arrive in the destination account, so it's important to plan accordingly. You will also need to keep in mind any potential transaction or withdrawal limits, which could vary based on the type of account.
Almost Never an Impact on Your Credit
Given the relative effortlessness of the process and the potential to enhance the earning power of your deposits, you might be wondering if there are any downsides to holding multiple accounts—particularly in terms of your credit score. Fortunately, opening a savings account generally won't have a negative impact on your credit, as banks and credit unions typically don't report savings account information to the credit bureaus.
Generally, banks and credit unions do not check your credit when you open a savings account, or they do a basic overview of your credit report, known as a "soft pull," without impacting your credit score. It is very rare for financial institutions to carry out a more intensive credit inquiry known as a "hard pull" when you apply for a new deposit account. Even in this case, the effect on your credit score should be temporary and relatively minor.
FAQs
With interest rates on savings accounts still the highest they've been in years, it pays to save. But while having one savings account is good, many financial advisors and budgeting experts actually recommend keeping several, even if the balance in each one remains small.
Why is it important to have more than one bank account? ›
Having multiple bank accounts may help track individual savings goals more easily. Separating finances. For spouses and domestic partners who prefer to split household finances, multiple bank accounts can help you spend and save in a way that's right for your relationship. Raising money-wise kids.
Why is it important to have a separate savings account? ›
Advantages of Keeping Separate Accounts
It's a way to protect yourself from yourself. Another key advantage is that having a designated savings account can make it easier to budget for major expenses during the year such as property tax or vacation.
Is it better to have more money in savings? ›
The recommended amount of cash to keep in savings for emergencies is three to six months' worth of living expenses. If you have funds you won't need within the next five years, you may want to consider moving it out of savings and investing it.
What are the pros and cons of having two bank accounts? ›
The Pros and Cons of Multiple Savings Accounts
- Advantage: Protect your savings from yourself. ...
- Advantage: Contribute toward multiple goals. ...
- Disadvantage: Harder to meet the minimum balance requirements for earning interest. ...
- Disadvantage: More confusing than having a single savings account.
Having multiple accounts allows you to separate money for expenses from savings. Having separate accounts for different categories can simplify expense tracking to see whether you're staying on budget or need to make adjustments. You can also track progress towards savings goals better.
Does having multiple savings accounts hurt your credit? ›
In general, bank accounts don't affect your credit score, and they don't show up on your credit report.
How many accounts should one have? ›
Money coach and certified financial planner Ohan Kayikchyan says it can make sense for a household to maintain four accounts: one checking account for monthly recurring bills and another for variable expenses, plus one savings account for emergency funds and a second for other savings goals.
How many savings accounts can a person have? ›
While there's no limit to how many Savings Accounts you can have, there are a few things to consider before signing up for more than one. According to financial experts, it isn't advisable to open more than three Savings Accounts, as it can be difficult to manage.
What are two advantages and two disadvantages of savings accounts? ›
Savings account benefits include safety for your savings, interest earnings and easy access to your money. However, savings accounts may have drawbacks, such as variable interest rates, minimum balance requirements and fees.
For example, you may want to have one personal checking account and another business checking account if you're self-employed, do gig work or run a small business. Keeping business income and expenses separate can make filing taxes easier. Separate accounts could also make sense for tracking specific expenses.
How many savings should I have? ›
For savings, aim to keep three to six months' worth of expenses in a high-yield savings account, but note that any amount can be beneficial in a financial emergency. For checking, an ideal amount is generally one to two months' worth of living expenses plus a 30% buffer.
Should you have more than one savings account? ›
Is It a Good Idea to Have Multiple Savings Accounts? Having multiple savings accounts could be a smart move if you have very targeted financial goals. It makes it easier to keep those goals separate and prioritize how much and how often you save toward them.
How much cash can you keep at home legally in the US? ›
While it is legal to keep as much as money as you want at home, the standard limit for cash that is covered under a standard home insurance policy is $200, according to the American Property Casualty Insurance Association.
Is $5000 a lot in savings? ›
About 29% of respondents have between $501 and $5,000 in their savings accounts, while the remaining 21% of Americans have $5,001 or more. Few hold much cash in their checking accounts as well. Of those surveyed, 60% report having $500 or less in their checking accounts, while only about 12% have $2,001 or more.
Do multiple savings accounts affect credit score? ›
Your bank accounts don't affect your credit score, but they still play a vital role in getting credit.
How many savings bank account should I have? ›
While there's no limit to how many Savings Accounts you can have, there are a few things to consider before signing up for more than one. According to financial experts, it isn't advisable to open more than three Savings Accounts, as it can be difficult to manage.
How much money is too much in a savings account? ›
FDIC and NCUA insurance limits
This insurance protects your money if the financial institution you bank with goes out of business or otherwise can't afford to let you withdraw your money. So, regardless of any other factors, you generally shouldn't keep more than $250,000 in any insured deposit account.
What is the most I should keep in a savings account? ›
For savings, aim to keep three to six months' worth of expenses in a high-yield savings account, but note that any amount can be beneficial in a financial emergency. For checking, an ideal amount is generally one to two months' worth of living expenses plus a 30% buffer.
