As Australia faces its first recession since the early ‘90s, you may be wondering if keeping all your money in one bank account is the best option.
How you decide to divvy up your income, if you do at all, is entirely up to your personal financial situation and budget. But there are benefits to having multiple bank accounts, and some misconceptions around only having one
Let’s take a look at some of the common myths of having one bank account and whether they are true or false, as well as some of the benefits of multiple accounts.
Benefits of keeping money in one account
- Myth 1 – Simplicity
Having one single bank account your income or Centrelink payments are deposited into can afford greater simplicity for your finances. You only need to remember one set of bank account details, have one debit card and link one account to your bills for direct debit.
Fact check: False.
While having one bank account may offer some simplicity in your finances, it may end up causing more confusion down the road, prevent you from reaching your savings goals and potentially cost you more. If your bills are coming out of one bank account, which charges a failed payment fee, and your balance goes below $0, you will be stung.
Further, if you’re hoping to save up some money for a financial goal, only having one bank account prevents you from potentially earning interest on your savings through a savings account, and makes you more prone to dipping into your savings, as it can be easily accessed via your debit card.
- Myth 2 - Multiple accounts may get confusing
Perhaps you’ve tried multiple bank or savings accounts in the past and found it too hard to keep track of. Keeping your money in the one bank can also reduce any amount of confusion for some Australians.
Fact check: True.
It can absolutely be difficult for some Australians to keep track of multiple bank or savings accounts. If having one bank account allows you to reduce any potential confusion or difficulty in your finances, then this may be the right option for you.
- Myth 3 – Loyalty
You’ve been with the same bank account since you were a kid and believe that staying with them for many years will afford you additional benefits and perks than new customers.
Fact check: False.
The concept of loyalty to a bank is dead. In fact, banks will typically sting you with a loyalty tax – meaning existing customers tend to pay higher rates and fees than new customers across most financial products.
Bank account providers, home loan lenders, credit card providers and more will offer generous introductory rates, reduced fees, cashback offers and much more just to get new customers on to their books. If you’ve been loyal to one bank your whole life, then you’ve never done your research around what other options may be out there and whether they might offer you greater service, reduced rates or costs.
Benefits of multiple bank or savings accounts
On the flip side, there are a range of potential benefits to having more than one place to store your money, which is why two-thirds of Australians have accounts at more than one bank.
Here are just a few of some of these benefits:
- Safety – If your bank details are compromised, you lower your risk of having your entire balance wiped, or having access to no funds, until this is resolved.
- Savings rates – You may need a linked everyday transaction account to meet a savings account condition and earn bonus interest.
- Savings goals – You may reach your savings goals faster with one or more savings accounts, than keeping your money in one bank account.
- Accountability – Multiple accounts also prevents you from dipping into your savings.
- High balance – Typically, bank or savings accounts will have a balance limit, meaning it may be better to spread your funds across multiple accounts.
- Linked products – Often times you’ll have a transaction or savings account linked to other financial products, like a home loan or credit card.
- Rate hopping – With interest rates at record lows, hopping from one savings account to another to ensure you’re getting the highest interest rates on the market.
How do I know which account is best?
Whether you opt for one bank account or multiple, it’s crucial that you regularly compare your options to ensure you’re not missing out on any potential savings.
Bank accounts may come with a raft of fees, including account keeping fees or failed payment fees. A simple bank account comparison using a comparison table can help you to see whether your existing account is the best one for your finances, or if there are more competitive options out there.
Savings accounts have variable interest rates, meaning they are subject to change based on the provider and the Reserve Bank of Australia’s cash rate. This means that it is invaluable that you constantly check to see whether your savings account is still competitive. Is it offering a high interest rate? Is it charging you any fees? What conditions are required to earn a bonus rate? What is the standard variable rate of the account?
Compare savings accounts regularly to ensure you’re getting the best bang for your buck.