Is keeping your money in only one bank a good idea? That depends in part on how you use your money, how much you have, and how convenient the banks are where you live. For some people in small towns, it can be tough to put you money in more than one bank if you have to access it all of the time. Getting deposits to a distant bank can be a bad deal. So, the answer depends a lot on you and how you live. Your confidence level in your local bank and its employees are also a factor.
If you are not really thrilled with the bank nearest to you, you might want to consider keeping enough money in that bank to avoid paying account fees. That way if you have to have some emergency funds, it will be convenient. Likewise, it might be the best place to have automatic drafts clear through so that you can be sure that you can get the deposit to cover it to the bank.
Generally, you want to keep your money in the bank that gives the best combination of service, cost, and interest. This may actually require multiple banks for different types of accounts. You might find the cheapest checking account at one bank. Always try to find a checking account with no monthly fees and low overdraft charges in case you make a mistake on your account. If this account pays interest, it’s better.
Also check on funds availability after a check is deposited. Some banks still require several days for personal checks over a hundred dollars or so. This can bite you if you aren’t careful. Ask how they clear checks. If they clear them in descending order from high to low, this is a bad deal.
If you happen to have a problem and the big check clears first, you will pay a fee on every little check that follows. You could end up paying $30 or $40 for a fast food beverage bought on your debit card. Plus if they return all of those small checks, you might be paying a fee to everyone you bought something from using that account. They need to clear from smallest to largest. Banks will disagree, but that’s because they want to maximize profits.
For savings accounts or certificates of deposit, you want the most interest possible. If you can find a bank that will allow you to add to a CD during the term or renegotiate the interest if it rises, it is wise to use that type of account. Most of the time fees associated with these types of accounts are not a factor because if you have to do something to incur them, it will be an emergency. You won’t be worrying about fees.
Customer service is an issue, too. In this computer age, it seems that the computer runs the show. In privately held small banks, you can still get a considerable amount of service. They will still review your account if you have a problem and contact you. Most of these banks give service well beyond their customers’ expectations because they want to keep the money locally. They may know a little more of your business that you will be happy about, but privacy laws still protect you. The service offsets most of the things you will have reservations about.
Spreading your money around even if you don’t have a lot, can make good sense. If you have money in neighboring communities, it can make for huge convenience when you’re trying to do business there. If you have a lot of money, you may need multiple banks to get enough insurance from the FDIC plan to cover your assets.
Finally, having more than one checking account can sometimes make good sense if you’re not the best at keeping a check book straight. You can let one account lay idle until you’re sure that all your outstanding items have cleared. This way you can avoid that problem that sometimes happens when an account gets messed up. It can take weeks to figure out if you have it fixed or not. This way, in a week or so, it’s good to use.