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Ask the expert: Juggling multiple bank accounts

September 16, 2010

By Richard Barrington | MoneyRates.com Senior Financial Analyst, CFA

Q: I see many banks that offer much better interest rates than my current bank does. I'd like to take advantage of them, but I think it's a hassle to switch banks. Should I use multiple banks to take advantage of higher rates? How many bank accounts is too many?

A: If you think it's a hassle to switch banks, wait till you try juggling multiple accounts at different banks!

If you find better CD rates, savings account rates or money market rates somewhere else, and open an account at the new bank, you might want to keep your old account open for a few months, to make sure everything at the new bank is to your satisfaction.

Eventually, though, there are a couple arguments in favor of consolidating your accounts, as long as it doesn't put you over the FDIC insurance limit of $250,000.

For one thing, so-called "jumbo deposits" -- those exceeding $100,000 -- might be eligible for special interest rates. This is more true of money market accounts than savings accounts. On average, money market rates for jumbo accounts are 0.14 percent higher than for ordinary deposits. Splitting your deposits among different banks would make it more difficult to reach the $100,000 threshold.

Also, accumulating larger deposits might make you eligible for other benefits that banks offer to larger customers, such as free checking accounts and better credit card terms.

What you might want to do is track the market for several weeks, to make sure you've identified the best savings account, money market account or whatever account type you're looking for. Then, when you're sure of your decision, open an account with the goal of eventually consolidating as many of your deposit dollars there as possible within the boundaries of FDIC insurance limits.

Got a financial question about saving, investing, or banking? MoneyRates.com invites you to submit your questions to our "Ask the Expert" feature. Just go to our home page, and look for the "Ask the Expert" box on the lower left.

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