Back in prehistoric times (i.e. before the advent of online banking), it made sense to do all your banking with one financial institution. After all, if everyone from the friendly teller to the branch manager knew you on a first-name basis, odds are you’d be entitled to a few perks, like getting the odd fee waived or a better rate when it came time to renew your mortgage.
But in today’s world where the Big Five Banks have been joined by a host of online-only financial institutions, co-operative banks, credit unions, and mortgage brokers eager to shop around for the best rate for you, does it make sense to have all your financial eggs in one basket? Or should you multi-bank? The answer is, it depends. Here are some examples of each case from my own experiences.
The All-In-One Advantage
There are still times when it pays to have your various financial products with one institution. My wife and I, for example, used to have a joint credit card and joint bank account with one bank. The advantage there was that if I was waiting on a cheque (freelance writers are often waiting on a cheque), I knew that I could hold off until the very last minute to pay our credit card bill. As long as I transferred the money out of our checking account to make the credit card payment within banking hours on the due date, the bank would recognize the payment as being made on time.
We later switched the chequing account to another institution (to take advantage of no-fee banking) so, now, I always make sure my credit card bill payment is made at least three business days before it’s due (as the credit card companies all recommend) to ensure my payment is processed in time and I don’t get dinged for a late payment.
Th Advantage of Multi-Banking
All that said, many of us do most (or even all) our banking via computer, with only the odd telephone call to a help line to clarify the procedure for certain unusual transactions (like, say, what happens if you deposit a cheque that’s make out in foreign currency). Given that you truly are just a faceless, numbered account in this case, there’s no possibility to build up any favours from personal connections. Which is fine, because if you shop around for the best rates and fee levels for your needs, you’ll probably come out ahead in the long-run anyway.
I once came into a fairly substantial amount of money through an inheritance. The timing was perfect since my wife and I had just started shopping for our first home. The money would come in handy for our down payment, but we didn’t know exactly when we would need it. Rather than locking it into a secure, interest-bearing product like bonds or a GIC that would have restricted when we would be able to access the funds, we decided to simply park it in a savings account that offered the highest interest rate we could find.
At the time we still had separate accounts – at two different banks – but neither offered anything even close to what online bank ING Direct was offering at the time. So we opened a free ING account, deposited the cheque, and collected a few extra dollars interest every month more than we would have if we’d used one of our existing accounts.
Same goes for RSPs and other long-term investments. We ended up switching our RSPs from one bank to another – directly across the road from the first – simply because the latter offered us more convenient hours during RSP season.
Today, we’re still not entirely happy with the investment advice we’ve been getting from the bank’s employees (who really only pay attention to markets and mutual funds for a couple a months at the beginning of the year), so we’re shopping around for an independent financial advisor who can help us better determine the best investment strategy for us, year-round.