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
Having multiple savings accounts can be beneficial for keeping track of different savings goals, taking advantage of different interest rates, and ensuring your savings are fully insured by the FDIC.
Is it good to have more than one savings account? ›
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.
If a single institution offers all the banking features you need, it can make sense to stick with just one bank instead of opening accounts at separate banks. However, if your bank doesn't offer all the features you want or you want a higher insurance coverage limit, consider using multiple banks.
Does having multiple savings accounts hurt your credit? ›
No, having multiple savings accounts doesn't directly affect your credit score.
Is it better to have multiple accounts? ›
There's no one correct answer, but it's usually best to start with at least two accounts—a checking account and a savings account. This gives you an everyday banking account for bills and other expenses and another for saving. Your bank account journey doesn't need to end there.
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.
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.
Is it important to have a savings account? ›
Having your own money available to cover an expense, instead of having to use a high-interest credit card or take a loan with interest, gives peace of mind and saves you from paying interest. An emergency fund should have 3 to 6 months' worth of expenses, especially to cover gaps in employment.
Is it healthy to have separate bank accounts? ›
Key takeaways. Keeping separate bank accounts after marriage could help you stay engaged with your money. Paying for shared expenses could mean using bill-splitting apps and extra planning for emergencies, but it's worth it for some couples.
Should you have more than one savings account? ›
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.
Is $1000 a month enough to live on after bills? ›
But it is possible to live well even on a small amount of money. Surviving on $1,000 a month requires careful budgeting, prioritizing essential expenses, and finding ways to save money. Cutting down on housing costs by sharing living spaces or finding affordable options is crucial.
What is too much to have in savings? ›
FDIC and NCUA insurance limits
So, regardless of any other factors, you generally shouldn't keep more than $250,000 in any insured deposit account. After all, if you have money in the account that's over this limit, it's typically uninsured.
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 bank accounts should I have for savings? ›
If you have a business, emergency fund, and specific saving goals, multiple accounts can help you stay organized and on track. On the other hand, if you are comfortable managing your money from one account and don't want to deal with the hassle of multiple accounts, sticking to one or two accounts is a viable option.
How much is too much in 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.
