This inconvenient banking trick is actually helping me save more money

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Key points

• Keeping all of your money with one bank could work against you, as you could miss out on an opportunity to earn a higher APY on your savings.
• Payment apps work with multiple banks, but the timescales for transferring money between them vary.
• Knowing that it will take a day to send money from my online bank to my traditional bank means that it takes more planning for me to spend the money in my savings – and I really like that.

I was a banking loyalist, since I had a relationship with a large national bank since my college days, and that has included maintaining both a checking and savings account at that institution. But while the checking account is free, the the savings account charges me if my balance goes below $300 plus APY is nothing to write home about.

So when I started freelancing in 2022, I opened a high-yield savings account at an online-only bank on the advice of my financial advisor. At the time, I just needed a place to keep the money I owe the IRS and my state every quarter to cover my estimated taxes (like a freelancer, it is up to me to make such payments). I thought it would be nice to earn some interest on that money along the way.

When it comes to money, be loyal to one banking institution it may not always be beneficial to you. And if you’re still keeping all your money in just one bank, you’re missing out on a number of potential benefits. In addition to getting a much higher APY on my online savings account, I also find it easier to save money and resist the urge to spend, thanks to the extra work required to move money between multiple banks. That’s how.

Making a payment app work for me

I get paid by my freelance clients via direct deposit. I have those payments set up to go into my checking account at the big bank, and then I distribute the money from there. Some of it goes to pay my bills, but before I do, I get Uncle Sam’s share as well as money for my savings goals (more on that later). Instead of using a traditional wire transfer to send that money to my online-only bank, I use a payment apps which works with both banks.

However, I discovered quite early in this process that money only moves quickly in one direction. Cash sent from my big bank to my online bank credits immediately. I have a process for making my money transfers/tax savings: I log into my big bank’s website, start the transfer, then log out and log into my online bank’s website and distribute the money further. When I switch accounts, the money has already reached my online savings account. How convenient!

But not so fast. If I have to transfer money in the opposite direction (from online bank to big bank), it’s not an instant transfer. Instead, it takes a day to happen. This is the kind of inconvenience I don’t mind, anyway.

My savings goals have changed

In late 2022, I gave my online savings account a new job: I started putting money away to buy a house. This means that a lot of money in there has a longer time frame than my quarterly tax payments, and it’s even more crucial that I earn a generous APY from it. This actually turns the inconvenient transfer time into an advantage. Why?

It gives me a greater sense of security knowing that I can’t just withdraw that money in the blink of an eye. And while I disburse various money along the way to home ownership (such as a security deposit, paying a home inspector, and so on), I’ll need to plan accordingly, giving myself time to plan and consider my expenses ahead of time.

My online savings account also allows me to set up different sections within the main account for different savings goals. In addition to saving for a house, I also have places for mundane goals, like money to pay for vet visits for my cats, as well as fun things like travel. I really like to see the money in those grow over time and I like being able to fund them in an instant, but it takes more time and planning to get the money right.

Knowing that cash can only be transferred instantly one way has made it easier for me to park the money in my savings account and harder to justify withdrawing. What’s wrong? If you have all your money with one bank and you’re saving for a big goal, I recommend moving your savings to another bank (and if it’s one that pays a higher APY, so much the better!). You may find that this drawback works well for you as well.

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