Using one financial institution: good, bad, or indifferent?
There probably isn’t a day that goes by that I don’t encounter mention of this or that online high yield savings account. Then I read this post by Jonathan at My Money Blog and it got me thinking about how my own finances are set up. It appears Jonathan used to use a couple of different banks for different reasons, but has moved to consolidate at WaMu.
I started to wonder what the advantages and disadvantages are of consolidating your financial dealings with one or just a few providers. Our finances are exclusively through USAA. If you’ve never heard of USAA, they’re a ‘military-affiliated’ financial services company. I’m not a representative of the company, so I’m not positive what all the membership requirements are, but generally you can use them if you or your parents are/were in the military. What I do know is that USAA kicks ass. They provide banking, insurance, and mutual funds and brokerage. I could do a whole post on them, but that’s not the point.
We do all of our financial services through USAA. I wonder, though, if this is the correct strategy. I’ve come up with a short list of advantages and disadvantages:
Advantages
- I only have to check one place each day to get updates on our bank balances, and, if I wish, investment account balances.
- Transfers and bill payments are faster. More importantly, if there’s a problem it’s much easier to fix. If both accounts or bills are with the same institution, you don’t have two places pointing fingers at each other.
- There can be discounts and bonuses for doing it all at one place. The commonly cited example is insurance. You should try to get both homeowners (or renters) and auto insurance from the same place. Typically there’s a discount for doing so. Also, minimum balances are sometimes met by using balances across all accounts.
Disadvantages
- If you bank online and your password is compromised, it could be more devastating since all your accounts use that one password.
- You might miss out on the best rates.
- If customer service sucks at one arm of the company, it likely sucks everywhere. (This is most definitely not the case with USAA - their customer service rules.)
Anyone have any other advantages or disadvantages to add to the list? What am I missing?
April 19th, 2007 at 12:19 pm
I agree that there are a lot of advantages to sticking with one institution.
My favorite is that, come tax-time, I generally only have to deal with one set of 1099s. By going with a reputable firm (Vanguard), I have reasonable confidence that the forms are correct.
We used to have accounts at several places but several years ago we consolidated them as part of an effort to simplify our finances. That was one of the best moves we made.
I will, however, disagree with your disadvantage #3, at least in the case of Vanguard. I have found Vanguard to have *exemplary* customer service in their retail division, but I’ve been extremely frustrated with the service from their small business division. Fortunately my dealings with those bozos have been fairly limited.
Vanguard doesn’t offer a regular checking account, so we supplement it with a non-interest-bearing local account at a credit union. I prefer having a local physical presence for checking anyway.
April 19th, 2007 at 12:31 pm
I love this post! I use USAA for just about all my financial needs. Yes, they do indeed kick ass!! I too have wondered if it was prudent to put all my eggs in one basket but the bottom line is that USAA has never EVER let me down. The only minor glitch is their brokerage services. USAA’s trading fees are very low but it’s hard to beat FREE with www.zecco.com and that’s why I’ve started using zecco instead. Wish me luck with zecco because I’ve seriously been spoiled by USAA.
April 19th, 2007 at 3:08 pm
I’ve never used zecco but I’ve heard good things. I don’t think anyone can beat USAA’s customer service - in any sector.
April 27th, 2007 at 3:27 am
April 29th, 2007 at 11:01 am
July 25th, 2007 at 8:05 am
[…] life insurance coverage through our respective employers. We also have life insurance through USAA, where we do almost all of our financial business. When my wife quit, she obviously lost the benefit of life […]
July 26th, 2007 at 11:54 am
July 26th, 2007 at 12:45 pm