To keep her finances organized, Parween Mander uses a Simplii Financial chequing account to pay her bills, keeps multiple dedicated savings accounts at EQ Bank and relies on a Koho cashback prepaid Visa account for everyday spending.
“I like EQ because it’s no fee and it allows me to keep my savings out of sight and out of mind from my main banking with Simplii," said the 27-year-old Vancouver-based founder of digital financial education and coaching platform Wealthy Wolfe. "The reason why I move my spending money into my Koho account is so that I know exactly what I can spend per pay period without having to do mental math like I would if I kept it all in the same chequing account with my bills.”
Some financial experts say that spreading financial accounts across different banks can make money easier to manage, prevent overspending and help customers take advantage of the perks each institution has to offer.
If finances are tight, it can be tempting to dip into your emergency savings fund before your next payday if that account is listed right below your chequing account when you’re online banking, said Jarrett Holmes, a financial planner at Ironshield Financial Planning Inc. in Winnipeg.
But if you keep your savings at a separate bank, you’re creating an extra barrier to accessing that money because you have to login and transfer your savings to your chequing account, he said.
It’s also a good idea to have more than one savings account, Holmes said. He recommends creating multiple accounts that you can assign jobs or goals to, such as saving for gifts, travel, emergencies and a mortgage down payment.
“It allows you to manage your money with more intent,” he said. “If you’re spending out of one big pot of money, you won’t have that same level of awareness of where your money is going.”
Mikael Castaldo, general manager of Everyday Banking at Ratehub.ca, said that while sticking with the same bank for years might sound like a safe choice, taking a strategic approach can also help you find the best deal for each type of account.
“Using different banks to hold accounts allows you to customize your banking experience by getting the best features or interest rates that suit your financial needs,” he said.
“You can also find great signup bonuses that will sweeten the deal. Many banks have competitive interest rates for new clients — sometimes up to 3 per cent — on high interest savings accounts. It can really pay to be a new client at a bank.”
Mander, for example, said she wanted a higher interest rate, in addition to keeping her savings at a different institution. “The benefit is that I’m earning more in interest than if I kept it within the same bank,” she said.
Although there are benefits to using different banks, Canadians should also be cautious of inactivity fees and minimum balance requirements, Castaldo said.
“Some banks will charge a fee if an account is inactive for a certain period of time. For example, Scotiabank charges $20 per year for two to four years of inactivity which increases to $30 per year for five to seven years. If you have accounts at multiple banks, make sure you’re keeping track of them all to avoid being charged an inactivity fee,” he said.
“Minimum balance requirements should also be kept in mind. Bank accounts such as the TD Every Day Chequing Account require a minimum balance of $3000 to qualify for a monthly fee waiver. If you are splitting your money across multiple accounts, hitting a minimum balance might be challenging.”
Mander said that because she uses e-transfers to send money between accounts and purposely chose digital banking alternatives that don’t charge typical fees for traditional services, she hasn’t yet experienced any downsides to storing her money away at different banks.
This report by The Canadian Press was first published Dec. 29, 2021.
Leah Golob, The Canadian Press