collaborative post | Digital bank accounts have become increasingly popular in recent years, with their unique benefits turning them into an integral part of financial management. Almost everyone has at least one digital bank app on their phone to manage their money easier, make payments faster, and take advantage of the high interest rates and promos.
But are there any advantages to opening multiple digital bank accounts, or would it only complicate your financial life further? Here are a few things to consider before opening a second or third account:
1) You Can Take Advantage of Higher Interest Rates for Faster Saving
If you want your savings to grow over time, it may be worth putting them in digital bank accounts rather than traditional bank accounts. This is because digital banks often offer higher interest rates compared to traditional banks, with a bank like Maya Bank offering a base rate of 3.5% and the opportunity to earn up to 15% interest per annum. This is quite high compared to interest rates offered by traditional banks, which can go as low as 0.50% per annum. You would be able to take advantage of high interest rates like these by spreading your savings across multiple digital bank accounts instead of just keeping them in one.
2) Multiple Accounts Means a More Fragmented Financial Picture
Remember that spreading your funds across too many accounts can initially fragment your financial picture, making it difficult to discern your current financial health. This also makes it more challenging to track your progress on financial goals, as well as to finalize important financial decisions.
Thankfully, all of this will be manageable if you take the effort to track your expenses effectively, using a budgeting system that works for you. If you’ll end up managing multiple bank accounts, find a way to consolidate your view of your money—say for example by looking at each dashboard every day—to get the full sitch on your financial health.
3) Organized, Streamlined Budgeting
On the subject of budgeting, having multiple digital bank accounts can help organize your funds and savings better. Each account, for example, can be used for different purposes, such as savings, expenses, investments, and emergency funds.
You can also open bank accounts for the purpose of different financial goals, such as funds for a new house or car. This strategy not only prevents your savings from mixing with your everyday funds; it also gives you a clear view of your progress towards achieving your financial goal.
4) There’s a Risk of Keeping Dormant or Inactive Accounts
Many digital banks will classify accounts as dormant if there has been no activity for a certain amount of time, usually ranging from 12 to 24 months. They may also start charging fees to your dormant account and, if left unused for even longer, could close the account entirely and render you unable to access any funds that you may have.
If you end up keeping multiple accounts, use them regularly to ensure that they stay active. Do this by performing at least one small transaction every few months, even if it’s just to transfer a tiny amount from one account to the other.
5) Multiple Banks Can Mitigate the Risk of Financial Loss
Credit card fraud, digital theft, and account takeovers are only a few examples of bank risks that you should be wary about. While they may seem unlikely, it’s still important to minimize those risks if possible. Spreading your funds across multiple accounts can help lessen any financial damage you might experience if you do become a victim of bank fraud. This ensures that if you encounter an issue with one account, your other accounts will still remain safe and usable.
6) There’s Always Added Complexity When Handling Multiple Accounts
Lastly, handling multiple accounts means having to remember multiple login credentials, updating all your apps regularly, and monitoring your transactions across all accounts, among other responsibilities. Juggling too many accounts can be overwhelming and confusing, and losing track of one can cause you to miss out on time-sensitive promotions, alerts, or required activity to earn interest.
The best way to manage this is to take things slowly and learn your own limits. How well can you handle the accounts that you already have open? If you’re confident in your ability to handle another and believe that another account offers more benefits for your financial health, then you can open another account and see how it goes.
The Bottom Line: Should You Have Multiple Digital Bank Accounts?
There are both pros and cons to having digital bank accounts open. On the one hand, there are certainly added benefits that you can take advantage of, such as multiple interest rates for your long-term savings and better organization of your funds. On the other hand, the more accounts you have, the harder it will be to manage all of them at the same time. If you’re not proactive in your financial planning, there’s a risk of getting overwhelmed and being unable to effectively track your funds.
A good middle ground is to start small by sticking with two or three accounts and only opening a new account if necessary. Choose your accounts wisely and make sure that they can help you achieve particular financial goals.
