Why You Should Open a Backup Checking Account


For most consumers, the idea of opening and managing a second checking account ranks right up there with getting a root canal or going on a strictly cabbage diet. But is it really such a bad idea? Not if you open the second checking account for the right reasons.

You may not want to open a second checking account if it complicates your financial life, and that’s apparently where a lot of Americans are at right now. As MainStreet has reported, the Center For Responsible Lending says bank customers are as confused as ever about how banks handle their checking accounts, especially with key issues like overdraft fees and debit card transactions. That’s because, according to the Center, banks are being “deceptive” about checking accounts and overdraft coverage.

But if you feel like you’ve got a good handle on how checking accounts operate under the new rules imposed by Congress, and how banks have responded to those rules, then opening a “back-up” checking account clearly has some advantages:

To use in emergencies. Backup checking accounts are generally used by bank customers as a safeguard in the event of a money emergency. If you fall victim to identity theft or a data breach, for example, your bank may close down your checking account so the thief won’t walk off with all your money. But you’ll still need to pay bills and withdraw money, and that’s where a second checking account can come in handy.

Many entrepreneurs and sole proprietors use second bank checking accounts as an emergency fund if they fall short on taxes, or they drop their laptop at the airport and need to replace it, for example. Even dropping as little as $100 a month into a backup account can help build up a nice financial cushion in the event of an emergency.

To thwart online banking limitations. Online banks are usually a good deal; they offer higher rates and the simplicity of conducting your bank activities from the comfort of your own home. But there are limits, and a second bank account can help overcome those limits. For instance, if you need to cash a check, it’s helpful to have a backup account at a local bank. The same goes for changing currencies, or depositing paper checks quickly. Having a second account allows you to have it both ways – you can enjoy the higher rates with online banks and benefit from the customer service from a local bank at the same time.

To limit fees. With two checking accounts, banks aren’t as likely to impose fees for things like overdrafts – you can always tap the second account to cover any overdraft surprises.

To get higher rates. You can also usually earn more interest with a second checking account than you can with a traditional savings account. Checking account rates of 3% to 4% (especially for rewards checking accounts) are not uncommon, and you won’t get those rates with a savings account.

Opening a backup checking account isn’t for everybody, particularly if you like to keep your financial life simple. But backup bank accounts do offer tangible benefits that shouldn’t be ignored (especially the “emergency fund” factor). Take a look at what your bank offers, or what services you might benefit from by opening a second account at a local credit union.

They might be better than you think.

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