Is It Safe To Link Bank Accounts? – Forbes Advisor

Linking your checking and savings accounts can simplify money management. For example, it can make it easier to transfer funds between accounts in an emergency or set up regular deposits to grow your savings over time.

While linked bank accounts can offer convenience, there are some potential downsides to keep in mind as well. Here are the pros and cons of linking your checking account to savings.

What Does Linking Bank Accounts Do?

Linking banking accounts makes it possible to conduct transactions between them electronically. You can link bank accounts at the same bank or between different financial institutions. For example, linking external bank accounts is something you may do if you’re opening a new account with an online bank.

Let’s say you have a checking account at your local brick-and-mortar bank and decide to open an online savings account. The bank requires you to make your initial deposit using an ACH electronic funds transfer. You could link your existing checking account to your new online savings account to schedule the transfer deposit.

Linking bank accounts doesn’t make them the same account. It just makes it easier for you to move money from checking to savings or vice versa. And as mentioned in the online savings account example above, it may sometimes be necessary to link a checking account so that you can deposit money to an online savings account if you’re not able to do so at a branch or ATM.

Is It Safe to Link Bank Accounts?

The short answer is yes, it’s safe to link bank accounts. Linking bank accounts is as safe as any other banking activity. The level of security provided depends on your bank or credit union. For example, some banks allow you to set up multifactor authentication or biometric login (fingerprint or facial recognition) when logging in to your mobile banking app. This creates an added layer of security, in addition to your unique username and password.

Keeping your banking information safe, especially if you primarily bank online, is important. Identity thieves and fraudsters can wreak havoc with your bank accounts if you’re not taking steps to protect them.

If you’re unsure what safety measures your bank offers, you can check online or call a branch to ask. Also, keep in mind that you may need to contact more than one bank if you’re linking accounts at different financial institutions to make transfers.

How to Link Bank Accounts

Linking accounts often happens automatically if you open a new account at your current bank or credit union. Typically, you are asked how you want to fund your new account during the account opening process. You can select your current account. Once the account is open, it should be visible under your existing online or mobile banking login.

If you have multiple accounts at the same bank or credit union that aren’t yet linked, ask the institution to do it for you. This way, all accounts are visible when you log in to your online or mobile banking app.

How to Link Bank Accounts From Different Banks

Linking bank accounts at different banks typically involves logging into one bank’s online or mobile banking system and entering key information for the account you want to link. To link a checking or savings account to an external bank account, you’ll need to know your:

• Routing number
• Account number

You can log in to online or mobile banking for one of the accounts you want to link. In the banking menu, you’ll want to look for the option to link external accounts. You’ll need to enter the routing number and account number to start the process.

It’s not uncommon for banks to require verification to link external bank accounts. So your bank may make one or two small test deposits to the account you’re trying to link. You’ll need to verify the amounts of those deposits before you can connect the accounts.

But what about linking other types of bank accounts? For example:

• Can you link a savings account to Venmo?
• Is it possible to link a checking account to a budgeting or investing app?
• Can you link a savings account to PayPal?
• How do you link a credit card to a checking account?

The short answer is, it depends. Venmo, for example, allows you to link checking accounts but not savings accounts. PayPal allows you to connect checking or savings accounts.

Budgeting and investing apps may allow you to connect to both checking and savings. And you may be able to link a credit card to a checking account as an overdraft line of credit. With any of these options, the linking process is roughly the same. You’ll need to provide the routing number and bank account number and potentially verify test deposits.

Pros of Linking Checking and Savings Accounts

If you haven’t done so already, there are some good reasons to consider linking your checking and savings accounts. Here are some of the main benefits:

It’s Convenient

Managing multiple checking and savings accounts becomes more straightforward when those accounts are linked together. For example, say that you have several savings accounts set up as sinking funds: one for emergencies, one for a down payment on a home you’re planning to buy and one for your biannual car insurance premiums.

You could link each of these accounts to your checking account and schedule recurring automatic transfers between them. This is an easy way to grow your savings on autopilot. And, if you need to tap into your emergency fund because of an unexpected expense, you could simply transfer the money over to checking through online or mobile banking.

That’s much easier than having to go to the bank and make a cash withdrawal or purchase a cashier’s check from savings. And it can save you money on ATM fees or official check fees as well.

It May Save You Money or Unlock Banking Perks

As mentioned, linking your checking and savings accounts could help you minimize ATM or cashier’s check fees. But having linked bank accounts could also yield savings on other types of fees.

For example, some banks charge a monthly maintenance fee for checking. But you may avoid that fee by maintaining a minimum combined balance across your checking and savings accounts.

If you’ve linked your accounts, you could easily sidestep a monthly fee if you’re meeting the minimum balance requirements. Even a $5 monthly fee can quickly add up over a year, so if linking accounts may save you money, that’s a great reason to consider it.

Aside from that, having your accounts linked could help you access added perks offered by your bank. For example, some banks offer benefits like interest rate discounts on loans, fee waivers or higher interest rates on deposit accounts when you link checking and saving and maintain a combined minimum balance.

It Can Help You Avoid Overdraft Fees

Overdraft means your checking account balance is in the negative. This can happen if you make debit card purchases against a check that hasn’t cleared yet. Banks can cover those purchases for you, but they can charge one or more fees to do so.

Overdraft fees can take a bite out of your bank account if your balance ends up in the red. The average overdraft fee in 2021 was around $25, although some banks charge more. And banks also may charge multiple overdraft fees per day or charge an extended overdraft fee if your account balance remains negative past a certain number of days.

Linking your checking and savings accounts together makes it possible to use your savings as overdraft protection. This is a service that you specifically have to opt in to at your bank, and it can help avoid overdraft fees. If your checking account is in danger of being overdrawn, your bank will automatically move money from savings to checking so you don’t get hit with an overdraft fee.

Cons of Linking Checking and Savings Accounts

While there are some good things about having your checking and savings accounts linked, there are a few drawbacks as well.

Overdraft Protection Isn’t Necessarily Free

If you’re enrolling in overdraft protection to avoid overdraft fees, it’s important to know that this service is not necessarily free. Banks can still charge a service fee for transferring money from savings to checking for you. Although this fee may not be as high as the $25 or more you may pay for having an overdraft, you could still end up paying $10 to $15 per transfer, depending on the bank.

Remember, you don’t have to sign up for overdraft protection when linking checking and savings. But to avoid overdraft fees, you’ll need to be diligent about keeping track of your checking account transactions and balance. A simple way to do that is by setting up transaction and balance alerts.

It May Be Too Convenient

Having your checking and savings accounts linked means your money is accessible at all times. While that’s a good thing when an emergency comes along, it can also be a temptation to spend your savings unnecessarily.

For example, you could be out shopping and come across a great deal on something you hadn’t planned to buy. Instead of skipping the purchase, you may decide to transfer money over from savings to checking to cover it or hit the ATM to withdraw cash.

Linking your checking and savings accounts requires a bit of discipline and knowing how you want to use your savings account. If you know that you may be tempted to dip into savings from time to time, setting up a separate savings account for “fun money” that you can link to checking can keep you from draining your emergency fund on nonessentials.

You May Miss Out on Higher Rates

When opening a savings account, it pays to compare the interest rate and APY you could earn at different banks. Keeping your savings account and checking account at the same bank may not always be the best move if you could get a higher APY on savings elsewhere.

For instance, some online banks offer high-yield savings accounts with much more competitive interest rates than traditional banks. Getting the best rate possible on savings may become more important if banks lower rates rather than raise them.

There’s a workaround for this. You could open a checking account at one bank and a savings account at an online bank and then link them externally. This way, you still have the convenience of linked accounts while taking advantage of higher interest rates on your savings.

Should You Link Your Checking Account to Your Savings Account?

Whether you should link your checking account to savings depends mainly on your preferences for managing your money. If you value convenience and want to minimize banking fees, linking bank accounts could help you do both.

On the other hand, you may want to keep your bank accounts unlinked if you don’t need to move money between them. This also can be an excellent way to avoid the temptation to spend money from savings frivolously.

Remember to keep FDIC coverage limits in mind when linking accounts at the same bank. The standard limit is $250,000 per depositor, per insured bank, per ownership category. If you keep more than that amount across your checking and savings accounts, then it may make sense to set up multiple accounts at different banks to help ensure that all of your deposits are adequately protected.

And again, you could still link a checking account at a traditional bank to a savings account at an online bank for quick and easy transfers. If you’re practicing good financial habits, the benefits of linking bank accounts can far outweigh any potential negatives.

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