Why having all your finances in one place may be a bad idea

Customers use Toronto Dominion (TD) Bank ATM cash machines under video information screens showing a computer error in Toronto, Ontario, Canada June 24, 2017. (Reuters)

Our relationship with banks is changing. With new financial technology and non-bank financial services being made available, there has never been as much choice when it comes to how you can save, borrow, and invest your money.

But traditional banks are still trying to keep Canadian business all in one place. Most financial institutions offer incentives and bonuses for customers who sign up for multiple products with them. It has many Canadians asking, in today’s world when we have so much variety and the banking landscape is changing so quickly, does it make sense to bundle all your financial services in one place? The short answer is, there are some definite pros to having all your accounts together, but also some cons to consider, too.

Big banks have it all

When it comes to all-inclusive service, Canada’s big banks have you covered. You can walk into any branch, open a chequing account, apply for a credit card, get pre-approved for a mortgage and talk to a financial advisor about your investments like your RRSP, RESP and TFSA all in one place. Even with the advent of many boutique services that offer savings and loan products, many customers still appreciate the one stop shop that big banks can offer. This can save you time when you’re trying deal with multiple financial products at once.

Easy management

By keeping all your financial products in one place it is much easier, and usually cheaper to move money around. Bills are also paid automatically, rather than a lag of several business days. This is certainly the case when you’re using funds from one bank saving’s account to pay off a balance on a credit card issued to another financial institution. Also, banks don’t usually charge fees to transfer money between their accounts. So you can make an RRSP contribution, pay a bill and transfer money to another account, usually without incurring any extra costs.

But there are drawbacks to bundling financial services.

Harder to compare

Once your financial products are bundled all in one place it can be hard to compare one product to another at a different bank. If, for example, the annual fee on a credit card is waived because you have a chequing account with the same bank, it can be hard to assess if moving your savings account to another bank makes financial sense. You would have to calculate the fee on the credit card and then subtract any cost savings you’re getting from moving your bank account. It’s not always as easy as just comparing them side by side.

Security risk

Canadian banks have the strongest security measures in place to keep our money safe. But if there is ever an online breach or personal information is stolen, as an example, by having all your financial products in one place your entire financial profile could be at risk of being compromised. It’s important to keep all your contact information and employment details up to date. On the other hand, if you are bundled in one place, it’s just one phone call to make sure it is all taken care of.

The bottom line

Keeping all your financial services in one place is easier. But putting your finances on autopilot could mean you miss out on new (cheaper) and more innovative financial products. By having all your financial products in one place, you may be limiting yourself to new ways of saving, spending, borrowing and investing. Many of the new smaller companies offering financial products are doing it at a much cheaper rate. This is especially true of online investing. By bundling, you limit yourself to what only that bank offers.

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