What are the pros and cons of linking your bank account to your savings account?

Jacob Joseph 28 January 2016

pros and cons of linking your bank account to your savings account

Uncovering the pros and cons of linking accounts.

A lot of people have a transaction account and a savings account, but are they both with the same bank? Is it better to have both accounts with the same bank? This question is relevant to both how people shop for transaction and savings accounts and how they manage their money from day to day.

Here are the pros and cons:

The pros of linking accounts

  • Convenience. Having all your accounts and money with one bank makes your life a lot more convenient. If you make trips to your local branch or do your banking online, coordinating multiple accounts is usually easier within one institution.
  • No waiting time between transfers. Electronic transfers between different financial institutions can take up two business days. If you’re transferring between the same bank, it’s usually instant. Which leads us to our next point...
  • Overdraft protection. Linking your transaction account to your savings account may offer protection from overdraft fees. One of the most practical way to do this is to arrange an automatic transfer of money from savings to your transaction account if you overdraw.

Drawbacks of linking savings and transaction accounts

There are a few cons that make linking transaction and savings accounts less appealing.

  • Independent shopping. You have more options if you are free to choose between your transaction and savings accounts, independent of one another. You might find the best accounts in each category are at different banks. Don’t let loyalty make you lose out on interest.
  • No overdraft protection. It may seem odd to have this on both lists but if you let your transaction account have easy access to your savings, it may chip away over time. If you find your overdraft protection working regularly, you might be better off with an arrangement that forces you to develop better savings habits.
  • Inconvenient to manage. Having separate accounts with different banks might be more financially savvy but it can be a hassle having to manage two separate accounts. Having all your money in one spot can save time, especially when completing online transactions like paying bills.

So should I link my accounts or not?

There is no definitive answer to this question. It depends on your own preferences. So weigh up the pros and cons and decide if linking accounts will be beneficial for you. After all, there is no one-size-fits-all when it comes to personal finance.

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