One of the many consequences of the Federal Reserve's aggressive series of interest rate hikes since March 2022 has been a sharp increase in the yield you can earn in your savings deposits. Today, the top high-yield savings accounts pay an annual percentage yield (APY) of 5% or more, while rates on the top money market accounts are as high as 5.25%.
If you currently have a single account that does not match these payouts, it may be time to consider opening a new one or a secondary account—even if that means turning to a new bank or credit union.
Key Takeaways
- Today, the best high-yield savings accounts pay an APY of around 5% or more.
- If your current savings account isn't offering competitive rates, opening a second account at a different bank or credit union could be a smart option.
- Multiple accounts can offer you additional FDIC coverage, and help you achieve specific savings goals.
- There should be little to no impact on your credit score for opening multiple accounts at different financial institutions.
Benefits of Multiple Savings Accounts
The current high-rate environment represents an ideal opportunity to reevaluate your savings plan. If you've been stashing your savings deposits in the same account for at least a few years, it's worth checking that the current APY you're earning is competitive with today's top rates.
Opening multiple accounts could be one way to ensure that you're maximizing the potential of your savings by earning the top yield. The flexibility of having more than one account can also help you manage fluctuations in interest rates, which could be important when the Fed eventually pauses its hikes and rates begin to move lower.
In addition, by splitting your savings into more than one account, you boost the amount that can be covered by the Federal Deposit Insurance Corporation (FDIC). The FDIC guarantees your deposits up to $250,000 per individual per institution, so opening several accounts can multiply the deposits that you're entitled to have insured.
Holding your savings in multiple accounts can also be a way to help you stay on track to meet specific goals. For instance, if you're saving for a down payment on a house, you could open an account where you set aside money specifically for that purpose. This could help you avoid the temptation of spending these funds on other things.
Some banks and credit unions may offer bonuses to incentivize your deposits and loyalty programs to reward you for your banking relationship. Shopping around and opening several accounts can help you take advantage of these opportunities to make the most of your savings.
How to Manage Multiple Accounts
The process of opening a new savings account—or another interest-bearing deposit product like a money market account (MMA) or a certificate of deposit (CD)—is quick and easy. At online-focused financial institutions as well as the big-name traditional banks, you can often open an account with your computer or mobile device within a few minutes. All you'll need is your ID, Social Security number, and some other basic personal information.
When it's time to transfer money into your new account, the process is also relatively painless and simple. You should be able to move funds between your accounts with no more than the routing number and account number. Once you've linked your accounts, you can easily transfer money back and forth, making adjusting and managing your savings plan simple.
However, when you request an electronic transfer, your funds can take one to three days to arrive in the destination account, so it's important to plan accordingly. You will also need to keep in mind any potential transaction or withdrawal limits, which could vary based on the type of account.
Almost Never an Impact on Your Credit
Given the relative effortlessness of the process and the potential to enhance the earning power of your deposits, you might be wondering if there are any downsides to holding multiple accounts—particularly in terms of your credit score. Fortunately, opening a savings account generally won't have a negative impact on your credit, as banks and credit unions typically don't report savings account information to the credit bureaus.
Generally, banks and credit unions do not check your credit when you open a savings account, or they do a basic overview of your credit report, known as a "soft pull," without impacting your credit score. It is very rare for financial institutions to carry out a more intensive credit inquiry known as a "hard pull" when you apply for a new deposit account. Even in this case, the effect on your credit score should be temporary and relatively minor.
