The Pros and Cons of Keeping All Your Accounts in One Bank

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Checking, savings, business, CD, money market, cash reserve, investment — with so many accounts available to U.S. consumers, should you keep them with a single financial institution? Let's review the pros and cons of keeping all your accounts in one place.

Pros of keeping all your accounts in one place

Here are some reasons why it makes sense to consolidate your accounts.

1. FDIC covers up to $250,000 for each eligible account

The Federal Deposit Insurance Corporation (FDIC) provides coverage of up to $250,000 per eligible account at the same insured financial institution. Covered accounts include checking and savings accounts, money market deposit accounts (MMDAs), and certificates of deposit (CDs).

So, as long as each one of your qualifying accounts has a balance under $250,000, it's OK to keep those accounts together at the same financial institution. For example, if you were to have $100,000 each in a CD, checking account, and savings account at the same FDIC-covered bank, you would still be insured. Even though the accounts together equal $300,000, each account has less than $250,000, and the coverage would still apply.

To find out if your deposits are insured by the FDIC, use the FDIC's Electronic Deposit Insurance Estimator (EDIE).

When you add accounts to your portfolio with the same bank, just remember that the FDIC warns consumers that non-deposit investment products, such as mutual funds, annuities, life insurance policies, and stocks and bonds are not insured by the FDIC.

Are you a credit union member?

• Federally chartered credit unions and those with headquarters in Arkansas, Delaware, South Dakota, Wyoming, or the District of Columbia are insured by up to $250,000 by the National Credit Union Administration (NCUA).

• State-chartered credit unions may be covered by a state-sponsored or private insurance, so contact your credit union representative for more details about potential insurance of deposits.

2. Quicker coverage of bounced checks

Having more than one account at the same bank may help you to quickly cover a check or automatic debit or credit transaction with insufficient funds.

Some banks may give you a quick heads up early in the morning that an incoming transaction won't clear due to a low balance, giving you time to make a quick deposit. In the event that you have a savings and checking account with the same financial institution, you could quickly cover the cash crunch by transferring funds from the savings to the checking account over the phone or online. (See also: How to Fix Your Finances After Missing a Payment)

Doing a quick transaction to cover that mistake could prevent the bank from applying overdraft or insufficient funds fees.

3. Access to higher savings interest rates and lower account fees

When you hold a large total of deposits within the same institution, very often you can qualify for better savings rates and reduced account fees. Find out from your financial institution whether or not they offer benefits for consolidating your accounts.

Similarly, holding a larger total balance across several investment accounts, such as an IRA or individual investment account, may grant you some breaks on investment fees. Generally, with at least $100,000 in investable assets in the same institution, you should get lower charges on future applicable fees, such as front-end or back-end loads.

If you don't meet the necessary thresholds to access better rates and lower fees, ask your financial institution if they'll accept a signed letter of intent to meet those thresholds by a specific date.

4. More personalized service

Maintaining a wide variety of products with the same bank allows the bank to have a better understanding of your financial history, overview of spending habits, and ability to pay back loans. When a financial institution has a more comprehensive view of your finances, then it can help you optimize your finances with more suitable products. For example, keeping several deposit accounts may help you qualify for a personal line of credit with an interest rate lower than that of a credit card.

Cons of keeping all your accounts in one place

Now let's take a look at the disadvantages of consolidating all your accounts under the same roof.

1. Missing out on potentially better deals

By turning your back on other financial institutions, you may develop a case of "financial myopia" in which you don't think about shopping around for better banking options. Sticking to your same brick-and-mortar branch may cause you to miss out on the better annual percentage yield (APY) that online savings accounts often offer.

According to the FDIC, as of June 12, 2017, the average rate for a deposit account with a balance under $100,000 was 0.06 percent. On the same day, you could find online savings accounts paying a savings rate of up to 1.25 percent for an account of similar size.

2. Potential of losing FDIC coverage

The FDIC coverage limit is $250,000 for each qualifying account. High-earners may run out of options in the same financial institution for opening eligible accounts and risk having a portion of their deposits without FDIC coverage.

3. Higher chance of loss in case of identity theft

Keeping all your eggs in one basket may work against you if a fraudster gets a hold of one of your accounts or cards. Getting access to just one account may grant them access to all of your money! This is particularly true when connecting two or more accounts so that one account covers another when a balance is running too low.

If malicious hackers were to get a hold of the password for your bank's online portal, then they would have hit a major jackpot accessing all of your accounts. By spreading your funds across more financial institutions, you lower the chances of a cybercriminal accessing your funds. Of course, this is as long as you don't use the same password for all online portals. (See also: 3 Sneaky Ways Identity Thieves Can Access Your Data)

The bottom line: Talk with your banker today

If you're thinking about opening more accounts with your current savings institution, it's a great time to sit with a representative and go over your available options. Armed with that information, you'll be in a better position to shop around for better banking options and make a more informed decision.

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