Managing multiple current accounts
Managing multiple current accounts
Some people may think that they can only have one bank account or just bank with one provider. The truth is, you can have multiple accounts with different providers. This doesn’t mean you can have endless amounts of accounts, but you can manage your finances by splitting them.
Let’s take a look at the pros and cons of having multiple current accounts.
Can I have multiple current accounts?
Yes, you can have multiple current accounts to manage your money and it can be useful if you’re smart about it. It can help to split out your money for different eventualities to encourage you to budget. For example, it can separate your spending money from your money for your bills, or your savings for a house from your savings for a holiday.
Having more than one can also have its down-side if you open too many. For example, it can impact your credit score or overwhelm you making it more difficult to manage your finances.
Why are multiple accounts useful?
Other than budgeting your money, having multiple accounts can be useful for a number of reasons.
Comparing new current accounts
Each bank can offer different features within their accounts, including overdrafts. Some people like to try out different accounts to compare them and see which features are more suitable to their financial situation. However, it is worth considering what you need before you choose your next current account.
Each bank or e-money institution can also offer a different service, whether that’s a local branch or an easy to use app. Some people may want to try out different providers to see which service they prefer.
You may decide to open a new account because the provider is offering a reward or bonus for joining. The offer could be of monetary value, or it could be a discount scheme for retailers etc.
Another useful reason to open another account is because you could earn more interest. Banks can offer an increased interest rate on your balance for the first year to entice you in. This way you can earn more on your money just by putting it in the bank. They can also cap the amount you can earn interest on, so it can sometimes be worth splitting your money into more than one account to gain more interest.
Keeping your money secure
If your bank is covered by the Financial Services Compensation Scheme (FSCS), your money is only covered up to £85,000. If you have more money than that it can be worth separating it into different accounts. It may also be worth separating your money to limit the loss if you become a victim of fraud. Even if your provider is covered to protect your money by the FSCS or the Financial Conduct Authority (FCA), like thinkmoney, fraud can still happen. If one of your accounts is hacked, although you may still get your money back, at least the rest of your money will be safe and untouched in your other accounts.
Are there any disadvantages to multiple accounts?
Yes, there can be disadvantages of having multiple accounts. Although there are many perks to having more than one, you need to be careful of opening too many.
Opening too many can affect your credit score
Every time you open an account, it is recorded on your credit history. Applying for too many accounts, particularly during a short period of time, whether you have been accepted or not, can have a negative impact on your credit score. It can give the impression that you are struggling financially.
Before you open a new account, it is worth checking the requirements. Some require a certain amount paid in each month or a certain amount of Direct Debits set up to prevent you from having multiple accounts.
One disadvantage of having too many accounts is trying to remember your details for each one. It is advised to have different passcodes and security questions for each one. If you have too many, it can make it more difficult to remember them. Also, if you forget which passcode is for which account, there is a risk that you could block yourself out of it.
Although having more than one account can usually help manage your finances, having too many could actually make it more difficult. If you have too many to manage, it can become difficult to maintain the funds in each one and to remember what each pot of money has been set up for.