Keeping your savings, checking and investment accounts in one bank may be convenient, but it could lead to the biggest financial mistake you could make.
Many of us have learned the hard way that a single financial mistake, such as a bounced check or an automatic payment you forgot about, can empty a checking account quickly. Funds can be almost instantly taken out of an account with modern electronic banking. The amount in an account can change almost instantly and so can the status of the account.
This can be a real problem if you have all of your accounts at one bank. Many people have overdraft protection that allows the bank to use funds from their savings to cover shortfalls in their checking account. The problem with this is that funds in savings and checking accounts can get drained quickly. Customers with this feature could find themselves with no money in savings.
Even if you don’t have overdraft protection, it is entirely possible that the bank might use your savings to cover payments from your checking account. That could lead to a situation where even a careful saver could end up with no money.
The problem could be compounded by identity theft, which is at epidemic proportions in the new economy . If you have two connected accounts at the same institution, a predator who hacked into your checking account would also have access to your savings. It might take the bank days or weeks to fix the problem, which could leave consumers without cash. Attacks like these are are rare but do occur at many banks.
Keeping your savings and checking accounts in separate financial institutions eliminates the possibility and protects your money. It is now a fairly easy matter to move funds between accounts at different institutions through an electronic funds transfer. It also means that money won’t leave your account unless you want it to. Banking at two institutions’ isn’t much of a hassle anymore because most of us almost never go to a physical bank these days. Your funds are probably deposited in the account electronically, and you probably check it via online banking.
Protect your savings moving money to an online savings or CD account at one of the big national banks like Ally Bank or American Express. They will provide you with a better interest rate, and they are easy to access through the Internet. Savings are protected up to $250,000 by the FDIC, and you won’t be at the mercy of one financial institution.
If you want to be able to quickly withdraw cash from savings, get a debit card on your savings account so you can make purchases or ATM withdrawals. This card can be kept in a drawer to avoid the temptation to use it for day-to-day transactions.
Give your money, especially your savings an extra layer of protection moving it to a second bank to avoid a financial mistake.