5 Factors to Consider Before Linking Bank Accounts

Linking bank accounts might seem like a simple step, but it’s important to consider how it fits into your overall financial goals. From managing day-to-day transactions to saving for the future, the way you structure your bank accounts could influence your spending habits and savings.

If you’re thinking about linking your checking account to your other bank accounts, there are five key factors you should consider before you move forward. Let’s take a look at those five factors below.

1. Convenience

Perhaps the main reason for linking your bank accounts together is convenience. With a linked bank account, you can easily transfer funds between your accounts when they are linked with the same bank. With just a few clicks on your bank’s website or mobile app, you can transfer funds from your checking to your savings account or vice versa.

However, this ease could come with consequences if you’re not careful. Sometimes, the convenience of linking your accounts makes it too easy to transfer funds from your savings account to your checking account, for example. You want to make sure you’re not tempted to overspend with the ease of shifting your money around so quickly.

2. Over-drafting

Having your accounts linked means that you are at less risk of over-drafting your account. When you overspend on your checking account, your bank usually allows your money to come from your savings account instead of resulting in an overdraft.

Typically, your bank charges a fee when you over-draft your account, but linking your accounts could avoid these fees.

3. Fees and Benefits

Banks sometimes incentivize you to link your savings and your checking account. This could mean you have some monthly fees waived or receive other perks from your bank.

Additionally, some banks offer better interest rates for your savings accounts if you link them to your checking account. This could help you save more money and reach your savings goals faster.

That said, you might want to explore what rates you would receive if you don’t link your accounts. Some online banks specialize in offering high-yield savings accounts that the bank with your checking account might not offer. Even though your bank provides some perks for linking your accounts, the interest rates you receive at another bank might prove to be more beneficial in the long run.

4. Security and Fraud Prevention

While linking your accounts offers convenience, it’s also important to think about the security implications. Having multiple accounts linked means a higher level of access to your funds in one place, which could potentially increase the risk of fraud or unauthorized transactions. If one of your linked accounts is compromised, it could lead to broader access to your finances.

Many banks provide robust security features such as two-factor authentication, alerts for suspicious activity and encryption to help prevent fraud. However, it’s still essential to monitor your accounts regularly for any unusual activity and ensure you’re practicing good security habits, like using strong passwords and updating them regularly.

Before linking your accounts, you may want to evaluate whether you feel comfortable with the potential risks involved. For example, if you’re using a shared device or if you’re concerned about online fraud, keeping your accounts separate might give you an added layer of protection.

5. Account Management and Tracking

While linking your accounts can simplify managing your finances, it’s also important to think about how it might affect your ability to track your spending and saving habits. When all your accounts are connected, it may become harder to distinguish between funds meant for short-term spending (like your checking account) and funds designated for long-term savings goals (like your savings account).

If you’re someone who prefers to keep a strict separation between different financial goals or wants to track spending more closely, linking accounts might make it more challenging to stick to your budget. For instance, you could inadvertently dip into your savings when your checking account balance runs low, making it harder to reach your savings targets.

On the other hand, some people find that linking their accounts helps them stay on top of their financial goals by providing a comprehensive view of their overall financial situation. It can also reduce the number of steps needed to track transactions, as everything is connected and easily accessible.

Final thoughts

There’s always a lot to consider as you decide about your personal banking, but knowing your options is the first step in making the right choice. Though it may be convenient to have your bank accounts linked together, if you’re worried about transferring your money from your savings account too frequently, then it might be better to keep your accounts separate.

It also might be best to find the best rate for your savings. If you’re linking your accounts solely because it is easy, you might consider options that yield you more savings over time.

Disclaimer: Article content is intended for information only. It may not reflect the publisher nor employees’ views. Consult a financial professional before making financial decisions. Publishers or platforms may be compensated for access to third party websites.

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