There are two main things that you need to consider when deciding whether to keep all your money with one bank. These are ‘rate of return’ and ‘convenience’.
Rate of return:
Basically, this just means does your bank offer the best interest rate on every account that you need, or at least a competitive rate? It’s important that you make your money work hard for you, so it would be foolish to keep your money in a low performing savings account just because the checking/current account happens to be good.
There is no doubt that it is more convenient to have all your money with one bank. For starters it makes transferring money between your various accounts easier. You can just log into their online banking service and make a transfer and the money will be in the destination account immediately. If you’re transferring money to an account held with another bank, however, that transfer may take considerably longer. (Note: It’s worth pointing out that, in the UK, there’s a Faster Payments Scheme being introduced in 2008 that should mean that payments to an account held at another bank should go through same-day as well, so that will make it more convenient to hold accounts with multiple banks).
Another benefit of having all your money with one bank is it gives you a consolidated view of your finances. If I have my money spread between five banks, for example, then I will have to have five separate online banking logons or will need to compare five separate bank statements to understand my total financial position.
Weighing up rate of return and convenience is a very personal matter. There’s no magic formula that you can apply to definitively tell you which approach is best. My stance is that I don’t necessarily need my money to be in the account that pays the highest interest rate for every product that I hold, but I do want them all to be very competitive. I think if you always insist on having the account with the best interest rate, you would end up switching banks every few months which would be a total hassle, for me at least.
One other thing that’s worth mentioning in the current environment is that banks (in the UK at any rate and probably also elsewhere) operate deposit protection schemes. This is where customers’ money (in savings accounts) is guaranteed in the event of a bank going bust but only up to a certain amount. The current UK scheme guarantees 100% of the first 2,000 and 90% of the next 31,000. With concerns being raised over the possibility of a bank going bust, in the aftermath of the Northern Rock and sub-prime fiascos, some people (with more than 31,000) are reconsidering the wisdom of having all their savings with one bank. For most of us, however, this will not be a pressing concern.