The pros and cons of bundling bank services

The pros and cons of bundling bank services

One-stop-shopping is an instinctively appealing idea, but does it make sense for banking?

Depending on which institution you work with, you might be able to bundle all your banking services with one company. In particular, large full-service banks may be able to provide such diverse services as savings accounts, checking, credit cards, mortgages, etc. However, before you restrict yourself to one bank, you should recognize that this might not be the way to get the best deal on each of the different services you need.

The following outlines both the pros and the cons of bundling all your banking services with one institution.

Bundling bank accounts: pros

Here are some things to be gained by having multiple accounts with one bank:

  1. One-stop shopping. If you have very active banking relationships, such as with a business line of credit or a complex CD ladder, you might find it convenient to conduct multiple transactions with one account login, phone call or branch visit. This also means fewer names and phone numbers to keep track of.
  2. Possible qualification for special deals. This can work in a couple different ways. If your total deposits exceed a certain threshold, you may quality for higher saving account rates or a checking account fee waiver. You may also be able to take advantage of cross-promotional offers such as a no-fee credit card available to a bank's deposit customers.
  3. Ease of online access. Banking online is a convenience, but less so if you have to keep track of multiple web site addresses and passwords. Gaining access to all your accounts via one site is much easier.
  4. A broader relationship can come in handy when you need something. When you need a personal loan or a financial reference, it helps if you can make the request of a banker you know, and point to a substantial account relationship as a reason for them to be fully responsive.
  5. Multi-service providers are likely to have a bigger geographic footprint. Banks whose range of services runs the gamut from deposit accounts to lending are likely to be larger institutions with more of a regional or national presence, which may come in handy if you travel frequently.

Bundling bank accounts: cons

On the other hand, here are some of the down sides to bundling accounts at one bank:

  1. Different banks have different strengths. Suppose one bank has the best saving account rates, while another has no monthly checking account fees? Perhaps still another has the lowest credit card rates. You can avail yourself of the best available terms for each product if you deal with different institutions.
  2. FDIC insurance limit. The more accounts you have in one place, the greater the chance you have of exceeding the FDIC insurance limit of $250,000. You can insure a higher amount if you spread your deposits among multiple banks.
  3. Relationship risk. It is not just the risk of uninsured deposits you have to worry about. If you have all your accounts at one bank, it can be more disruptive if that bank gets sold or closes down operations in your area.
  4. Different services are often not coordinated. The reality is that you may have to deal with different contacts for different services even if you have everything at the same bank.
  5. You may have to exclude more responsive local banks. Dealing only with large, full-service banks may mean that you overlook smaller local institutions that can be more responsive to certain needs, especially when it comes to lending.

Consider these pros and cons to determine whether or not to bundle your banking needs at one institution. Too often people keep going to their existing bank for additional services out of habit, but keep in mind that breaking that habit could save you some money if your bank is not competitive across all product lines.

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