Credit Assess
Many Canadian adults have a variety of financial products, like a credit card, line of credit, mortgage, car loan, savings and chequing accounts, along with a TFSA and RRSP. But should all these be managed by just one bank? Financial experts in Canada say no—it’s smarter to spread your money and debts across at least two banks to protect yourself in case things go wrong.
“Banks have conditioned us to believe it’s convenient and beneficial to keep all our accounts in one place,” says Richard Moxley, author of The Nine Rules of Credit and spokesman for eCredit Fix, a company that helps people improve their credit scores. “It’s understandable why people feel comfortable sticking with one bank, but I’ve seen too many people get burned by this approach.”
Moxley, along with Brian Pritchard, a credit counsellor and senior vice president at BDO Canada, breaks down the reasons why you should consider having accounts with multiple banks.
1. Access to Cash and Credit During Fraud
If your bank suspects fraud, it could freeze your accounts, and you’d need to replace any linked credit and debit cards. This process can take up to 10 business days.
If you only have one credit or debit card, you’re stuck without access to any funds or payment methods. This can be a huge inconvenience, especially if you have important payments to make, can’t physically go to the bank, or are traveling. Pritchard notes that in these cases, having another bank account could save you from being stranded without money.
“You’ve been defrauded, your accounts are drained, and suddenly, you’re in a tight spot because there’s no money left to use,” he explains. “If you had a second bank account, you’d still have access to cash.”
2. Protecting Your Assets from the “Right to Offset”
Most banks include a “right to offset” clause, allowing them to take money from one account to cover a debt in another. This typically kicks in after 90 days of non-payment on a loan or credit card.
“Anyone working in the debt industry will advise you to switch banks if you owe money, because creditors will try to take whatever they can from your account,” says Moxley. “They’ll grab your funds and freeze everything as soon as they’re able.”
In these situations, you don’t get to decide where your money goes. Moxley has seen families lose their entire paycheques to the bank, leaving them unable to pay rent.
“The bank takes everything, leaving you with nothing—and it’s frustrating for everyone involved,” he says. However, if your credit card is with one bank and your chequing account with another, creditors won’t be able to access your cash as easily, because the accounts aren’t linked.
3. Preserving Your Banking History
Your banking relationship can change for a number of reasons. You could get divorced and close a joint line of credit, your creditor might sell your contract to another bank, or your account could be closed unexpectedly.
In any of these cases, the history you’ve built with that bank disappears. If that’s the only bank you’ve ever worked with, you’re left starting from scratch.
“While your credit history will still be reported, you might have to begin fresh with new reporting at another bank,” Pritchard explains. Even switching banks voluntarily can mean starting over.
To avoid this, it’s best to maintain relationships with multiple banks, ensuring you always have a backup plan if something changes at one institution.
4. Better Deals Through Competition
Having accounts at multiple banks gives you leverage when negotiating for better offers. According to Moxley, if you have five products with one bank, they’re less likely to give you attractive deals.
“They essentially feel they ‘own’ you, and they won’t go out of their way to offer you anything special because switching banks would be too much of a hassle,” Moxley says.
Banks can get complacent when they feel like you’re stuck with them. However, by spreading your accounts across two or more banks, you can make them compete for your business. Whether you’re looking for a new credit card, line of credit, investment account, or insurance, it pays to shop around.
“Different banks offer aggressive deals at different times, especially when expanding certain products or running promotions,” Moxley explains. “But they won’t bother offering those deals if they think they already have your loyalty.”
By keeping your options open, you can often secure better terms or perks as banks vie for your business.
