4 Good Reasons Why You Should Always Have 2 Banks

This past week a 40 something year old man came into our Bank branch with the intention to transfer all of his business from another Financial Institution to our Bank.  Don’t get me wrong, we were happy to have his business but we had to question his actions.  It is very rare that a client will transfer all of their business out of their Bank after already having a relationship for many years.

The question that we always ask when people are transferring out from one institution into another is Why?  Why after many years of loyalty and establishing a relationship does a client want to transfer out?  Most of the time the answer is because of Customer Service.  It is important for us to know what went wrong with the other Financial Institution so that we don’t make the same mistake.  We definitely don’t want our client to also transfer out if he gets upset.  Emotions definitely play a part in our clients daily banking decisions so we want to make them happy.

The 40 something year old man who walked into our Bank branch ready to transfer was not totally unknown to us.  He was a client of our Bank, but we were not his primary financial institution.  He did have a basic bank account with us which was rarely used as well as a VISA card.  After he left our Bank branch we had upgraded his Bank Account,opened a High Interest Savings Account, upgraded his VISA card, transferred in his Retirement Savings Accounts as well as his Non Registered Investment Account.  We also applied for a Line of Credit in case of emergencies.

If the client was unknown to us the process would have been a lot longer because we would have had to open an entire new profile and do some security checks before the Bank accounts could be opened and changed.  Did you know that Financial Institutions can decline our request to open a Bank account?  When new Bank Accounts are opened and the client is unknown to the branch Banks often hold cheques that are deposited and give us low limits to access our money.  This is because they have to make sure (for security purposes) that the Bank Account is not being used for illegal activities.  The holding of funds and limited access to money can be very inconvenient to clients when they are making a Banking transition.

We have discussed choosing a Bank and where we chose to do our Banking many times here on DINKS.  As a Financial Planner I love it when my clients have all of their banking, investment, and credit business with me.  However, as a Client it may not be a good idea.

Here are 4 Good Reasons Why You Should Always Have 2 Banks:

1. For Peace of Mind.  In case your Bank Goes Bankrupt or for any other reason it is comforting to know that we have other options.  If we need to change Banks it is easier to start over if we already have a Banking relationship established with another Finanical Institution.

2.  For Convenience.  If you choose to bank with a Credit Union always also use a Major Bank.  Major Banks can provide services that Credit Unions can not, such as wire transfers and foreign exchange transactions.

3. Buying Power to Negotiate Between Banks.  We may be approved for credit at one Bank but not with another.  The truth of the matter is that Banks will rarely approve our credit application when we need it most.  If we have an existing relationship it can help get our application approved.  Banks may be more inclined to approve our application if they know we are also dealing with another Financial Institution.

4. Because We Always Need a Back Up.  In case you relocate to an area where your bank is not present or for any other reason, it is a good idea to have a back up Bank in case you have a Break Up with Your Primary Bank.  It is hard to establish a banking relationship later in life. Although Banks are always looking for new business it will be an easier transition if you already have an established relationship.  It is a good idea to use one bank for our day to day transactions and credit needs, and a second bank for our savings and investments.