Updated April 24, 2022

How Many Bank Accounts Should I Have?

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How many bank accounts you should have depends on your financial and professional situation. Learn how many is too many in this in-depth breakdown.

Everyone needs a bank account. In fact, you probably need two.

Are there cases where you'll need more than two? And what are the consequences of having too many?

Find the answers to some of your most common questions in this article. Find out how to determine the right number of accounts (and type of accounts) you should have.

How Many Bank Accounts Should You Have

You should have at least two bank accounts: one checking account for spending and one savings account for - you guessed it - saving up.

People who have saved a substantial amount of assets may find it helpful to open more than one type of savings account. Similarly, most business owners need a dedicated business account on top of their personal accounts (more on this later).

Can you have accounts with two different banks?
Yes, there is nothing legally or contractually requiring you to bank with only one institution. However, this may make transferring money challenging and time-consuming.

How Many Banks Does the Average Person Use?

No study has ever been done on the average number of bank accounts the average person uses. However, you can use data collected by the FDIC and Motley Fool to estimate this number.

Here's the breakdown:

  • 94% of Americans have at least one bank account
  • 70.7% of Americans have a savings account
  • 55% of Americans with a savings account have more than one
  • 7% of Americans are unbanked (have no bank accounts)

Based on this information, you can extrapolate that 38.9% of Americans have three bank accounts, 31.8% of Americans have two bank accounts, 22.3% have one bank account, and 7% have zero bank accounts.

Therefore, the average American has 2.03 bank accounts — about what we'd recommend.

How much does the average person have saved?
Even though many Americans have no savings, the average savings account balance is roughly $7,000.

Should You Have Bank Accounts at Different Banks?

Who you choose to bank with will depend on the purpose of the account.

Your primary checking and savings account should be at the same location for convenience. This is because you will be regularly transferring money from your checking into your savings.

The quickest and easiest way to transfer money is to have accounts at the same institution. These types of transfers are often instantaneous.

However, if you open a "long-term" savings account, such as a certificate of deposit, you should choose the institution that offers the best rates.

Types of Bank Accounts

  • Checking Account: This is designed for your everyday banking activities and transactions, such as making purchases, paying bills, etc.

    You get free access to your funds whenever you need them - available to transfer to other accounts, withdraw and spend via debit card. Some checking accounts do require a minimum balance, charge a monthly fee, or both.

  • Savings Account: Savings accounts are intended to be a safe place to save your money where it earns a modest interest rate.

    They usually have limits on withdrawals and transfers to encourage you to leave your money untouched. Unlike checking accounts, they do not come with debit cards or work with online bill pay.

  • High-Yield Savings Account: This is a specific type of savings account usually offered by online banks.

    These accounts offer up 10-20x as much interest as traditional savings accounts. Like regular savings accounts, you are limited to 6 withdrawals or transfers per month.

  • Certificate of Deposit (CD): A CD is a type of bank deposit that offers a higher, fixed interest rate than a savings account. Your money is then "locked up" (inaccessible) for a pre-determined length of time that you choose.

    Once your CD matures, then you can withdraw your money. Withdrawing before the maturity date can result in penalties and fines.

  • Money Market Account: A money market account is like a hybrid savings and checking account. You're still limited to 6 withdrawals a month, however, you get a little more flexibility and easier access to your money.

    MMAs may offer higher interest rates than savings accounts. However, in exchange, your MMA may have minimum deposit or balance requirements.

Is having too many bank accounts bad?
If you have multiple accounts serving the same purpose, you have too many accounts. This adds unnecessary complexity to your money management and increases your exposure to fraud.

How Do You Organize Your Bank Accounts?

Try organizing your bank accounts into three categories:

  1. Spending
  2. Short-term savings
  3. Long-term savings

For spending, your checking account is the perfect fit. Your checking account is attached to your debit card, checkbook, and any bills you pay online.

You should keep all the money you need for necessary expenses (recurring bills and spending money) in your checking account to avoid overdraft fees.

For short-term savings, a traditional savings account will work. It's especially a good option for emergency savings.

Savings accounts earn interest (unlike most checking accounts) and can also be accessed quickly (unlike CDs), making them the best place to park your rainy day fund.

Use our emergency fund calculator to figure out how much you should save for emergencies.

For long-term savings, consider using a high-yield savings account, CD, or money market account. These accounts are great savings vehicles for large, planned expenses sometime in the future, like buying a car or taking a honeymoon.

Or, you can use these accounts as a relatively safe way to grow your assets over time.

How many savings accounts should you have?
If you're just starting to save for the first time, you only need one savings account while you build a nest egg. If you have substantial assets, you may want to have at least two savings accounts.

How to Find a Bank Account for Your Business

If you own a business, you probably need to open a business bank account. This means that business owners should have at least three bank accounts in total.

Freelancers and sole proprietors are not legally required by the IRS to have a separate business bank account, but it is still recommended. Business accounts allow you to separate your personal and business expenses, track income, and protect yourself in the event of an IRS audit.

All other types of businesses (LLC, C-Corp, S-Corp, etc.) must have a business bank account by law. Here's how to choose your business bank:

  • Digital or traditional: Online banks usually offer lower fees and better benefits than traditional brick-and-mortar banks. However, with an online bank, you will not be able to deposit cash or establish fruitful relationships with your business banker.

  • Deciding on institution: You may be tempted to open a business account with the same bank you use for personal banking. This will make things more convenient, but you could miss out on perks that other banks offer. Do your homework before making a decision.

  • Check for fees: Many large banks, like Bank of America, charge business owners a bunch of costly fees, such as monthly service fees and wire transfer fees. Review the fee structure of any bank you consider or look for business banks that will waive your monthly fees.

  • Any extra perks? Some banks like Novo, offer business owners discounts on business services. Others like Chase and Citi, both CreditDonkey partners, have big cash bonuses for signing up. And others have great digital budgeting tools.

  • Balance requirements: Lastly, many business checking accounts have minimum balance requirements. Make sure your business cash flow can meet this threshold before opening any business banking account.

Once your business is sufficiently profitable and you have more than a few thousand dollars in your business checking account, you should also open up a business savings account to help you earn passive income from interest payments on a monthly basis.

When should I open up a business bank account?
You should open a business bank account once you're set to begin accepting or spending money as your business.[1]

How Do You Budget with Multiple Bank Accounts

Having multiple bank accounts allows you to earmark money for specific purposes. However, it can make it difficult to keep track of your budget.

In my experience, the best way to budget across all your accounts is to use a service such as Mint or Quicken. These tools collect data from all of your bank accounts, credit cards, loans, etc., to provide you with insights into your financial activity across all accounts.

Mint, for example, allows you to set a budget based on your income and will show you in real-time if you're spending more than usual across categories like "Food & Dining," "Shopping," and "Bills & Utilities."

The Bottom Line

The number of bank accounts you need depends on your situation. Business owners need more accounts than non-business owners. High net worth individuals need more accounts than people with less savings.

At the end of the day, everyone should have at least two accounts: A checking account and a savings account.

Looking to start saving more to justify your first (or second) savings account? Learn how to save money fast with 100 proven strategies that actually work.

References

  1. ^ U.S. Small Business Administration. Open a business bank account, Retrieved 4/23/2022

Write to Justin Barnard at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

This content is not provided by Citi. Any opinions expressed are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by Citi.

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