NEW YORK (MainStreet) — As regulators continue to limit traditional revenue streams and the effects of the economic downturn persist, many banks are offering consumers incentives to open more than just a checking account at their particular institution.
But is doing all your financial business with one bank worth it? According to experts, the answer is going to be different for each consumer.
“It really comes down to what type of person you are and what’s important to you,” says Casey Bond, Managing Editor for GoBankingRates.com. For instance, some consumers may prefer to be very hands off with their accounts, which could make a close relationship with one bank or banker beneficial. Others, conversely, may enjoy the thrill of chasing down the best deals on deposit or loan products.
To help you decide whether bundled banking is right for you, MainStreet breaks down the pros and cons of putting all your money, your credit cards and your installment loans in the same place.
Pro: It makes it easier to circumvent fees.
Checking account fees have become increasingly common as banks look to recoup revenue lost to more stringent federal legislation. However, loyal customers can readily avoid monthly maintenance fees by having more than one account with a financial institution.
“It may save you some money and some of the fees may be lowered,” says Bill Hardekopf, CEO of LowCards.com.
Bank of America, for instance, will waive the monthly maintenance fee it is testing in select markets if the customer has a credit card with them. Meanwhile, Citi customers can bypass the $30 monthly service fee on its CitiGold account if they have $50,000 or more in all linked deposit and retirement accounts or $100,000 or more across all their eligible linked Citi accounts. (Mortgage balances are excluded.)
Con: All your assets may be over FDIC insurance limits.
The Federal Deposit Insurance Corporation insures banks up to $250,000 per person or Social Security Number. Joint accounts are insured up to $500,000. The National Credit Union Insurance Fund (NCUIF), which insures participating credit unions, follows similar stipulations.
Note, “that is per depositor, not account,” Bond says. “If you have $300,000 in deposits, you would have $50,000 that is not covered.”
As such, high-income consumers may want to patronize several financial institutions to ensure their money is adequately protected.
Pro: You may be entitled to a lower rate on an existing loan or other bank products.
In an attempt to persuade people to do more business with them, many banks will lower rates on an existing loan for new checking or saving account holders. They may also offer better terms on other products, including Certificate of Deposits, Money Market accounts or credit cards that they are eventually in the market for.
Chase, for instance, offers up to 1% cash back or a 1% payment against the principal balance of up to $500 annually for the life of their mortgage loan to its checking account holders, while PNC Bank lets cardholders boost their rewards earning potential on certain credit cards when they also have a checking account at the bank.
As such, “don’t be afraid to ask the banker what the best deal you can get is,” Hardekopf says.
Con: You’re probably going to have to settle for a lower interest rate on your savings account.
Keep in mind, the lower rates on existing loans or additional products may mean you have to agree to a lower annual percentage yield (APY) on a savings account. This is especially true if you’re choosing to do your business with a large commercial bank.
“Big banks offer tepid interest rates,” Stephanie Wei, vice president of deposit products at NerdWallet, says, that hover around .25%, whereas online banks and credit unions may offer rates of 1% or more.
To determine which rates are literally in your best interest, you will need to sit down and do some math. Just make sure your calculations aren’t shortsighted.
“Use a three to four year horizon to find out what makes the most sense for you,” Wei says.
Pro: It can help you secure a new loan by establishing a relationship.
Of course, a stellar payment history with a particular financial institution may make that bank more inclined to give you a loan later on.
“Having a relationship already established with a bank can be really helpful, especially if you are teetering on the brink of qualifying,” Bond says.
Additionally, Hardekopf says “the relationship you can build with a banker may come in handy if you have questions” concerning your existing accounts or other banking products.
Con: It decreases the likelihood you’ll shop around.
Having a good relationship with a particular bank may help you secure a loan, but it in no way guarantees you’re getting the lowest rate that would otherwise be available to you. Locking yourself into a loan with your checking or savings account provider may decrease the likelihood that you’ll go looking for a better deal.
“You may not be aware of other opportunities at other financial institutions,” Hardekopf says. “It’s always good to shop around.”
Those who are already committed to bargain shopping may end up with accounts at different locations because rates can be so varied from financial institution to financial institution.
Pro: It’s convenient.
When it comes to financial matters, some consumers may prefer to keeps things simple.
“There are some people who just don’t like six different statements coming to them each month,” Hardekopf says. “It may be overwhelming for them.”
Some people may also enjoy logging into one website to view all their financial statements on single screen and it’s certainly easier to stay on top on one account with a single name and password when it comes to checking for fraudulent charges or suspicious activity.
Con: You can wind up stranded without access to funds due to a breach or technical difficulties.
On the other hand, being beholden to a single bank can leave you in a lurch if that financial institution suffers a data breach or is otherwise compromised.
“If you have multiple accounts, it’s only a portion of your money that’s affected,” Bond says.
It could also inadvertently leave you without access to your funds should the financial institution experience technical difficulties. Bank of America customers, for example were left without access to their accounts for the better part of a Friday in early September when the financial institution’s website crashed due to technical glitches.
Pro: Money transfers are likely to go through expeditiously.
That being said, money transfers between a checking or a savings account as well as payments made from a checking account on an existing loan will be processed more quickly when the accounts are with the same financial institution.
“It’s faster. It’s almost instantaneous,” Wei says, whereas “transfers between two banks can take 24 to 36 hours or a couple of days.”
As such, opting for faster transfers may benefit someone who is particularly nervous about making payments on certain bills on time.
Need some help understanding your checking or savings account contract? Check out this MainStreet round up of 10 Confusing Banking Terms Explained to get the answers you need!