Bank loyalty often doesn’t pay off financially, which is something I’ve learned firsthand. When the banking landscape shook with the collapse of SVB and Signature Bank, it prompted me to reassess my own banking relationships. Ideally, maintaining three different banking relationships strikes a balance between safety and financial efficiency.
Back in 2009, during the financial crisis, it made sense to diversify banking relationships to protect assets, especially if you had more than the FDIC-insured $250,000 at any one bank. My approach involved having separate banks for operations, borrowing, and investing. This not only spread the risk but also helped in getting the best possible terms from each bank based on their strengths.
For day-to-day operations, I chose a bank like Citibank because of its extensive global network which was beneficial for frequent travels, especially to Asia. However, an alarming incident in Beijing where I was held captive until I gave up my Citibank ATM card for cash made me realize the value of having a global bank during emergencies. Citibank quickly resolved the issue by reimbursing the stolen amount, solidifying my loyalty.
For borrowing, I preferred a bank that offered low interest rates on loans and mortgages. Having a relationship with your mortgage banker can sometimes lead to better deals, as was my experience with Wells Fargo despite its past controversies. The bank offered competitive rates which helped in reducing long-term borrowing costs.
When it came to investing, a bank with low trading fees and a robust user interface was crucial. Fidelity, for example, became my choice due to its zero trading fees and excellent online platform, making it ideal for managing investments and retirement accounts efficiently.
Today, while three banking relationships might still be ideal for those with substantial assets or loans, even those with less can benefit from maintaining at least two. This not only provides safety nets but also positions you to leverage the best offerings from each bank.
The importance of diversifying banking relationships became especially clear to me during the recent bank collapses. By spreading my assets across multiple institutions, I was able to mitigate risks associated with any one institution facing financial difficulties. Moreover, this strategy allows flexibility to shift assets around to where they can earn the most at any given time.
While loyalty to a single bank can sometimes feel simpler or more integrated, it’s often more beneficial financially to spread your banking across multiple institutions. This approach not only helps in maximizing returns on deposits and investments but also ensures that you are getting the best terms on loans and other financial products.
In conclusion, whether you’re protecting large sums of money or just starting out, having multiple banking relationships can safeguard your finances and provide you with a competitive edge in managing your money more effectively.
