Depending on how large your bank is, you may find that it works as a one-stop solution for all of your financial needs. Beyond the usual checking accounts, savings accounts and certificates of deposit (CDs) that make up the most popular products in retail banking, you'll also find that the largest banks provide credit cards, mortgages and investment accounts. Such banks depend on their deposit accounts to serve as gateway products that open the way for customers to expand their banking relationships with more complex offerings.
While there are many benefits to keeping all of your finances at one institution, there can be risk involved as well. Last month's false account scandal at Wells Fargo was a direct consequence of bankers being ordered to "cross-sell" existing customers on extra products like credit cards and additional deposit accounts —whether or not they really needed them. While it's unlikely that other banks will condone that level of employee misconduct in the wake of Wells Fargo's debacle, the whole episode should put consumers on alert about buying too deeply into a single bank's services.
When you consider getting a new account —deposit, credit card, loan or investment —you should weigh the convenience of sticking with your existing bank against the possible advantages of the offers you find at other places. Banks make efforts to provide integration and synergy among their various products so that customers will find it easier to stick around. For instance, a bank might allow you to avoid the monthly maintenance fee on your checking account if you link an investment or mortgage account with a certain balance.
The benefits can also make it easier to manage your money: a bank might connect its credit card rewards program to the same online tool as its deposit accounts, so that customers can set up automatic card payments out of their checking accounts. And if you find it important to have a more personal banking experience, it's far easier for a banker to sit down with you and speak to your broader financial situation if they can access and analyze all of your accounts as a whole. Having multiple accounts at one bank makes it more likely that the bank will make an attempt to work with you on a more personal basis, simply thanks to the fact that you represent a significantly more valuable customer in the long-term than someone who has only one account.
On the other hand, the proliferation of online-only banks and alternative banking products means that you may want to shop around for lower fees or better rates than traditional institutions typically offer. Online savings accounts, for instance, pay much better APY on deposits than even the CDs that you'll find available at brick-and-mortar banks, and online checking accounts represent the only real "free" checking options available, typically charging no monthly fees.
If you're willing to deal with the complications of dividing up your money among multiple banks, there are clear benefits to be had in shopping for individual accounts. However, you should be wary of any transfer fees that might arise when you have to move money between institutions. Depending on the method you choose, you might find yourself paying charges you wouldn't have to worry about if the accounts were held at the same bank, and it could also take longer for your money to become available compared to an internal transfer.
This article first appeared in ValuePenguin.