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Ask the Expert: Pros and Cons of Consolidating Accounts at One Bank

August 03, 2010

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

Q: What are the pros and cons about keeping all my accounts at one bank?

A: You've asked this question the right way, because there is no one right or wrong answer to whether or not you should keep all your accounts at one bank. Instead, you are likely to find both advantages and disadvantages to doing so, and you'll need to weigh those things relative to your situation.

Here are some of the advantages of keeping all your accounts at one bank:

  • Convenience. It's not just a question of one-stop shopping, but also the opportunity to build a relationship with bank personnel over time.
  • Bargaining power. The more money you have with one institution, the more likely you are to qualify for preferred treatment, in the form of higher bank rates or fee waivers.
  • Account linking. You might benefit from having your checking account linked to money market accounts or savings accounts at the same bank. This can give you a cushion against overdrafts, while helping you maximize the amount of money you keep in an interest-bearing account.

At the same time, there may be some disadvantages to grouping all of your accounts at one bank:

  • Inflexibility. What are the chances that the same bank will have the best CD rates, the most cost-effective checking accounts, and the best features on savings accounts and money market accounts? You might do better if you can shop for each product independently, and take the best the marketplace has to offer in each category.
  • FDIC insurance limits. The permanently raised insurance limit of $250,000 has given depositors much more room to accumulate assets at one bank, but larger depositors must remain aware of this ceiling as they add accounts at the same institution.

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

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