Updated on 11.19.07

A Two Checking Account System: Why It Works For Me

Trent Hamm

Over the past several months, I’ve started to really bank on a system of two checking accounts for my personal use, a system that has confounded a lot of people in my life. “Isn’t having two checking accounts rather confusing?” I’ve been asked more than once. “What’s the point?”

It turns out that there really is a point in doing it this way and using both is not at all confusing, as the two accounts serve very different but complementary purposes. Here’s the scoop.

About a year ago, I was very disappointed with my checking account at a major bank chain. They were constantly finding new and creative fees to ding my account with and I was getting sick of it, so I decided to seek out a new checking account, which I wrote about in the past.

During that process, I made a list of checking account features that I was really looking for:
+ no fees, period
+ some percentage return on my account balance, the higher the better
+ a nationwide fee-free ATM network
+ free online bill pay
+ the ability to write paper checks
+ the ability to easily visit a teller whenever I wanted
+ the ability to have 24/7 phone-based customer service

I quickly realized that in order to get some of these options, I was going to have to use a large, international bank. Thus, I started looking at the interest checking accounts offered by some large banks and quickly came across ING’s Electric Orange checking, which at the time offered a 4% APY on your checking account balance. This account hit home runs in four areas:
+ it had no fees, period – not even overdraft fees (they allowed you to essentially “borrow” the money to pay bills, then pay that back with interest, which usually just added up to pennies)
+ a 4% annual return on my balance, calculated daily and compounded monthly
+ a free online bill pay service and online account access
+ a fee-free nationwide ATM network
+ a 24/7 phone-based customer service

However, the account was missing two key features for me: you cannot write paper checks and there are no tellers you can visit to conduct business like cashing checks and so on. This frustrated me at first, but I decided to make the move to Electric Orange anyway.

Shortly thereafter, I closed up my account at the large mega-bank and then opened a checking account at my local bank in town. It turned out that my local bank offered the services I was looking for: a free checking account with online access and a branch not far from my home to do business with a teller if I so wished.

So now I have two checking accounts I use regularly. I keep most of my balance in the one that pays interest, from which I do online bill pay and most of my other transactions. However, that local checking account allows me to have a checkbook for free and gives me teller access, so I keep a few hundred dollars in there at all times and just use it for writing paper checks and any services that a teller might be useful for.

This system works incredibly well for me. Since there is no account at any bank that provides all of the services I’m looking for, I found that using two banks in this capacity works extremely well to provide all the services I need.

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  1. How about a national bank like Citibank or Bank of America? If you want the extra interest..you can open a money market account or high yield savings to store the bulk of your balance and just manually transfer amounts into your checking as needed.

  2. Beth says:

    What do you find you use tellers for? I can only recall three in-the-bank transactions in the last ten years: 1) getting money before an international trip (and now I’d use an ATM) 2) once I had a check written in Canadian dollars so I needed to do a special deposit (and of course B of A charged me for the teller visit and only waived it when I called them on it) 3) I needed some sort of certified check for a new apartment.

    My only bank is one that does not have a local branch and it hasn’t been an issue, so I’m wondering if there’s some reason I’d need a teller that I am missing.

  3. LC says:

    I also use 2 checking accounts. I have an account at my local bank that I’ve had for a while (no interest). I like the fact that I can visit a teller if I want, and having the account allows me to invest in their CD’s, which often have good rates. I use this account primarily for debit card transactions.

    I also have an online checking account with Schwab that pays 4.25%. There are no fees at any ATM as well as free checks. I use this account for bills that I pay with paper checks.

    I never really thought that it was confusing or even that it was unusual. Just a good way for me to keep track of my spending and earn a little interest.

  4. APSampson says:

    I’ve been doing the same thing since I got the email from ING that they were rolling out Electric Orange to existing customers.

    If you know you’re going to need it, you can also request pre-printed paper checks be sent to you or the intended recipient.

    Now, if only my landlord would sign up so I can send him electronic checks!

  5. Toxic says:

    Makes sense to me. My husband and I had separate checking accounts prior to our financial meltdown. We decided it was best to combine them until we have paid off all of our credit card debt. Once we have less bills to pay, we intend to open two checking accounts – one for bills, one for all other expenses (gas, clothes, etc.).

    We feel that it will make it easier to track our expenses.

  6. George says:

    You might want a teller when you’ve had identity theft… a regular teller will know who you are.

  7. Susy says:

    I use the same system. ING for bills almost everything, but I keep $500 in my reg. checking from my local bank.

  8. Amanda B. says:

    I would avoid B of A because they are the bank of Satan. Awful fees, horrible customer service and I don’t like being poked with a huge fork while I wait in line for a teller.

  9. Lauren says:

    What about the fact that ING takes so long for funds to clear?

  10. Laura says:

    I have the same system Trent and I love it. My local credit union along with ING take care of my banking needs and then some.

  11. Ashley says:

    I’ve been told that it’s good to have a local bank account so that you can be “friends” with someone at the bank. Then when you need a mortgage or other loan, it’s easier and I’ve heard small local banks sometime have better deals on loans.

  12. Keri says:

    @George – my brother lives in a really small town and owns a mid-sized concrete company. He banked at SouthTrust – and only ever used the one branch in town (in other words – saw the same tellers probably weekly). Anyway, his secretary stole money from him for FOUR YEARS (over 200,000) by writing checks to herself and her husband and forging my brother’s name. Sometimes she would do this more than once a day too. From that experience, knowing the tellers meant NOTHING. There were 100 ways that she should have been caught by the bank ALONE. But they didn’t catch her and only returned a small portion of my brother’s money (something like $50 was all they were responsible).

    I think you’re slightly screwed wherever you go. :(

  13. Keri says:

    OOPS – should have added that she would go to the same local SouthTrust branch in town where my brother always went to cash the checks. Like I said, sometimes several times a day. If they would have even just checked the signature card they would have seen the signatures didn’t match. They weren’t even CLOSE.

  14. I too use this system — Electric Orange plus my local credit union. I’m shocked to hear I’m not the only genius who saw the benefits of these two accounts together.

    Also: I have my paycheck (biweekly) deposit half a mortgage payment into my credit union account, and the mortgage auto-pays from that account. Other than the occasional paper check that draws on that account, it’s the only thing I use the credit union for.

  15. Barry says:

    I have a similar 2 account system as well… it works great for us!

  16. Heidi says:

    I do this, too!

    The ING accounts are really the best deal out there – I recommend them to everyone who asks (and I work at a major competitor). They are willing to take a loss on your small deposts now in order to have a crack at you when you have some serious cash. Great value prop – great business model!

  17. Andrea says:

    I use Washington Mutual which provides a good combination of a free checking account and a high yield online savings account (4.75% APY). You get a free checkbook and you can transfer money between these two accounts instantly. Plus, they give you free outgoing wires!

  18. Daniel says:

    I have been with ING for nearly a year now. Their checking is great. I closed my BoA account shortly thereafter and now have a simple Wachovia Checking Account with $100 for those emergency ATM or check moments.

  19. Jeremy says:

    I love the concept and would like to cut my brick and mortar bank out completely. I use Wachovia and they have always had good customer service with me, but I hate to lose out on the interest so I always walk a fine line with how much I keep in my checking account. Does anyone have experience with Salem Five Direct? They seem to have a pretty good plan and you can write paper checks with them.

  20. Eric says:

    I laughed when I saw this article because I actually signed up for ING’s Electric Orange last night. Now I’ll have two checking accounts as well and I’m curious to see how it goes.

    One interesting thing not mentioned in the article is that Electric Orange has a Send Check feature, to mail paper checks online, without any fees. I don’t think Electric Orange had this option when it was first created (which is why I didn’t sign up initially). I’m about to test this feature soon and hopefully it works! If it works well, I may end up with one checking account instead of two.

  21. LC says:

    I said I had 2 – my husband has a 3rd one too – I guess that might be overkill.

  22. leslie says:

    I keep thinking about switching to ING. I already have savings accts. there and I like the idea of making a little interest on my checking balance too. I mostly think this around the time I get my rather insulting interest payment each month from my regular bank (I think the last one was 8 cents). The no paper checks is kind of a problem for me though. I don’t write them often – 2 or 3 a month or so. But that has been what my hang up with switching is. I would have to do the two account thing and for me right now that is just more hassle than it is worth.

  23. Kaitlin says:

    I feel like I could have written this myself. I do the same thing. I use ING (which I’ve been using for my savings acct for years) for my major expenses. I have two jobs, so my big paychecks get directly deposited into that account and all the bills come out of that account automatically. Then, for my other job (much smaller paycheck and no direct depoist) I use my old Wells Fargo account. This has the added benefit of helping me to budget automatically because I know that all of my bills and investments will be taken care of automatically and the Wells Fargo account is for groceries, misc expenses and fun.

  24. Meg says:

    I have a two account system for different reasons.

    One account, my primary account, is for all monthly fixed expenses (mortgage, utilities, phone, gym, insurance, savings, investments, etc.). Yes, sometimes the utility bills vary, but they’re relativley fixed. Each and every one of these bills is paid automatically from this account (including my savings/investment allocations). I basically never touch this account. The same amount goes in every month, and the same amount goes out–automatically.

    The other checking account is the one I actually use; it’s for all discretionary spending (food, gas, entertainment, shopping). The same amount goes in every month, and I can spend it down to zero with no guilt, since I know all my bills and savings are being taken care of automatically in that separate account.

  25. Acero says:

    I know everyone says the ING EO is a checkless checking account but really, do you need to have a book of checks in-front of you when ING will cut and send a paper check on your behalf the day after request? That has always worked for myself with no problems at all.

  26. Jennifer says:

    I also just switched to ING as my main checking account, but have kept my account open at my hometown bank for check writing purposes. I’m interested in trying out their electronic check where you input the payee’s routing # & account # and they send an email telling the payee that money is being sent from you. Has anyone used this feature? I’m not sure that many people will feel comfortable giving out that info, so I imagine that the feature will not be used often, but I’m happy to allow ING to pay for mailing out a check for me. Trent, I would be interested in hearing more about your experience with this paperless checking!

  27. Frugal Bachelor has four checking accounts: B of A, Citibank, Chase, and E*TRADE. The first three ensure that he can go anywhere in the United States and (hopefully) find ATM without having to pay fees. He has to have a local branch as he visits 1-2 times a month to withdraw quarters to feed the laundry machine. The last account is so he can go to any ATM on the planet and not pay fees. Most checking accounts are free as long as you direct deposit (even a nominal amount) monthly, or have enough equity at the institution. Frugal Bachelor does not care what interest rates checking accounts pay because he keeps very little money in them. He hears about ING a lot on the internet but has never seen one in person.

  28. chris says:

    I’ve been doing this too. I’ve had a checking account at my alma mater’s credit union since freshman year, nearly unlimited free atm access made it golden for me.

    But once I heard about charles schwab’s online checking I had to make the move. The only thing charles schwab lacks is an easy way to deposit money. So I maintain the credit union account (minimum $500 balance to avoid fees) to deposit the rare check via atm, and I use charles schwab for everything else, including free atm use after fee rebates.

  29. Doug says:

    It’s almost embarrasing to admit but I have 6 separate personal checking accounts. Two are for my sideline rental property business. One with BB&T for the rents, mortgages etc. The other is with HSBC to hold the security deposits.

    The other 4 allow me to keep my financial life compartmentalized. One electric orange at ING as an easy access savings account. One at Bank of America for personal bill payments and as a transfer conduit for deposits to ING. BofA has the simplest and quickest to use online bill pay I have ever seen. Two accounts at BB&T – one is a purely personal account and the other is a leftover from my days trying to flip houses (mostly losing money). The last one only exists because it is linked to my PayPal account and I’ve been too slack to change Paypal to another account.

    I believe that it is important to keep a low balance in the account that you normally pay bills and such out of to help keep spending in check.

  30. Sandy says:

    I have a free checking and savings account with USAA Federal Savings Bank. They refund other banks’ ATM fees. This is great for me locally or when I travel out of State. I have direct deposit, but on occasion will receive a check to deposit and can do that in 2 ways: either w/a scanner, or mail it in one of the self-addressed, stamped envelopes that they provide. They give me free checks; I probably write 3 per month. As for the bills, I have web bill pay with them for most and the rest are automatically withdrawn. I have auto and home ins. with them too, as well as a charge card, which I use only for online purchases and airline tickets, then transfer that amount from my savings to checking to pay it off immediately. I’ve been banking with them for over 20 years; their customer service reps. are top-notch.

  31. Cool, I just can’t decide how I want to manage my checking accounts. I currently have three with different banks and I have yet to find my perfect system. I’m not sure if I can ditch the local bank yet, even though I would like to. Or maybe I just need a better local bank.

  32. JM says:

    I stumbled across the same system! Like Susy (3:17) I keep about $500 in my local bank’s account, except my local bank (Commerce Bank) is being gobbled up by TD Bank. Commerce charges me no fees provided my balance stays above $100, but I don’t know what TD Bank’s policy is. I have noticed that transfers from a regular bank to ING Electric Orange take several business days longer than they did in the past, so you have to watch it. The solution is to transfer funds from ING Savings which is instantaneous. Another benefit: the overdraft interest charges are peanuts compared to what most banks will charge for a bounced check (it can happen to the best of us).

    I don’t see any reason to keep any significant amount of cash in a conventional bank’s checking account.

  33. Also Dave says:

    I have a seller financed mortgage, and have been deposited my monthly mortgage check into the seller’s checking acct at the local bank each month for the past 4 years. So, I already had the necessary account number and routing number, and having just recently signed up for Electric Orange, I advised the seller about depositing the mortgage payment directly into her account this way. She “picked up” this month’s payment via email, so I think it worked quite well, but haven’t heard on what day it arrived to know how many days the transaction took since the electronic transfers generally seem to take a day or two. I’m saving myself 12 trips to the bank each year. And that was the only regular paper check I was ever writing. I’m also earning interest on the mortgage payment before it’s sent. I used to just pay it immediately when I got paid, a week or two before it was actually due b/c there was no reason to keep it in my non-interest bearing checking acct.

  34. Frugaljane says:

    Frugal Bachelor,
    If you have a $10 bill (or any amount), any bank should be willing to give you a roll of quarters. Before I got a washer and dryer at home, I just exchanged my bills for rolls of coins at the bank branch inside the grocery store every few weeks.

  35. Louise says:

    @Frugal Bachelor
    Maybe Frugal Bachelor is joking, but the reason Frugal Bachelor has never seen an ING in person is that they are online only (which is why they offer relatively high interest on checking and savings accounts).

  36. Danny says:

    Here is what we do:
    Chase Freedom credit card to buy everything (food, gas, clothes, etc.), even bills, tuition, and rent. The rewards % is great. We use it like a debit card, and never carry a balance.

    Then we have a Wells Fargo checking account that we use to deposit checks and to use as a conduit for out ING Electric Orange. Ideally most of our checking money stays in ING to get the interest.

    Then an Emigrant Direct high interest savings account to store our savings.

    Everything is automated to either come from our credit card or ING Electric Orange if they don’t do auto payments on a card. It is a bit of a hassle having so many accounts, but I spend less time transferring money than most people do writing checks and paying bills.

  37. sp says:

    I have two checking accounts. One is a free checking account with a local bank, because I often deposit expense checks and rolled coins (try depositing coins at an online bank!). I also have my insurance payments deducted from that account. Because the payment amounts are not the same each month, I keep an eye on the balance and add money when needed. The branch (with an ATM) is only 1.5 blocks from my house.

    My second checking account is with Chase, which also has a bank branch near me, and I have my paycheck deposited to this account. I use my Chase Freedom card (like Danny does) to cover everything I can, and I transfer payments to the card twice a month so that I do not pay interest.

    The Chase checking account is free, and they offered me a $75 sign-up bonus because I already had a credit account with them.

    Also like Danny, I have a high-interest savings account with Emigrant and a link from my checking to an ING account (mine is a special savings fund rather than Electric Orange). Gee, Danny, were we separated at birth?

    I leave just enough in the checking accounts to cover the bills, plus a couple hundred of padding to cover irregular expenses that may crop up during the month.

  38. Chris says:

    I do this same thing, but my primary bank is USAA Federal Savings Bank. I HIGHLY recommend you check it out. They have an insurance company you can only use if you are active or retired military, but the bank is open to everyone, and they are hands down the best bank, offering the most free services, highest rates, and even reimbursement of ATM fess charged by other banks. The only catch is they don’t have local branches, but I use a local bank at a different bank for deposits, and then ETF funds to USAA which USAA makes available immediately. Free bill pay, interest on checking at any balance, I could go on and on…

  39. Chris says:

    We use two checking accounts to keep a simple budget. One checking account is for “Fixed Expenses” (e.g. savings, mortgage, auto insurance, utilities) — things that we know will occur regularly if not monthly. The second account is for “Variable Expenses” (e.g. groceries, entertainment, clothing). At the end of each year, we examine our bills for the last 12 months and determine the bi-monthly amount required to cover Fixed Expenses for the next 12 months. This amount is then set for direct deposit. The remainder flows into Variable Expenses. This system insures that we always have money to pay the bills, even in months where several large bills are due at the same time (i.e. auto insurance + summer utilities).

  40. Kamantha says:

    I have actually 3 checking accounts. I have a main checking account from Citibank. Then I have one that I keep $200 in at the Credit Union (never know when you might need a loan or something) and I have a ING Checking Account, that I acutally treat like a savings account. I keep my short term savings there.

    I also have a money market account where I keep my intermediate savings and then the ING savings account for long term savings.

  41. EA says:

    I’m getting ready to do the same thing. I’m a former NetBank customer, and since Netbank’s accounts were purchased by ING Direct I now have an Electric Orange account. After Dec 7th I won’t be able to write checks on the old account, nor will I have the nice pre-paid deposit envelopes from Netbank. I’ll be opening a small checking account locally and linking it to the Electric Orange account to transfer money in and out. I’ll be able to write the few checks I need and deposit any checks that come my way.

  42. Beth says:

    I second the recommendation for USAA. I use them for 100% of my banking now and have been extremely satisfied. I didn’t realize that mere mortals (non-military or military-relatives) could use their banking products too. They are also my source for a 7.75% credit card (prime + 0%).

    I also have accounts at Navy Federal, and they were great as well, but slightly higher rate on the card and not as good an interface for web bill pay, so I made the switch (but left those accounts open as I’ve been at NFCU since I was 7 – talk about a long credit history!).

  43. kath says:

    I do the same thing as Meg 5:40pm does. I have one account for my fixed expenses and automatic withdrawals, and another for discretionary spending- gifts, entertainment, kids piano lessons, extras. It seems to work for me.

  44. Sandy says:

    USAA also does mortgage loans and home equity loans. I had both with them, paid them off last month (yah!) and after I paid off my house, they pre-approved me for a $125,000 heloc, which I will never use. I mention this because in prior posts some people were under the impression if you paid off your house, you couldn’t tap into the equity later and get a heloc; you can. USAA has 2 different savings accounts. I have the one they call Performance First Index, which has a higher interest rate, but there is a minimum balance required (use it for my emergency fund). It’s interesting to read how others manage their money because we pick up a lot of useful tips that way.

  45. MikeVx says:

    I have 4 checking accounts. One with a credit union that is part of the co-op ATM network (free ATMS nearly everywhere!), one is with an area bank that I use as a debit card account, one at another local bank to play personal-escrow with my property taxes, and an ING Electric Orange, which serves mostly as a second debit card account, as the debit card is compulsory and therefore the account is not suitable for any other use on a regular basis.

    The CU account handles the day-to-day bills and cash needs. The tax account gets three checks drawn on it a year (taxes and homeowners insurance) with deposits out of each paycheck, the local debit account gets money sent in (via my ING savings these days) for spending with the card (on-line purchases, mostly, plus the odd “oops, I’m out of cash” moment), and the ING EO serves as a backup debit card. If I do use EO to send money by check, I transfer the money from savings and set up the check before 11:00PM so that payments are safely isolated from any card-based shenanigans.

    While I acknowledge that debit cards are useful, I consider the practice of connecting them to “live” checking accounts to be distilled insanity. A single scam or even a mangled debit and you are out more than a lifetime of benefits add up to. That is why I have isolated accounts. The damage is limited because theft or errors relating to a card cannot make my car payment bounce.

  46. bankelele says:

    i live in Kenya where even as I wish I could have a no frills, no charge account, no bank has that product and we are stuck with very expensive bank fees. The best we can get are flat fee accounts, where there are a bundle of services offered for once price – includes checkbook, e-banking, TM fees – mine costs about $7.50 a month

  47. Tony Roberts says:

    Coulee Bank ( http://www.couleebank.net ) offers an incredible 6.01% APY with their Rewards Checking account. The rate is easy to earn. All you have to do is make 10 check card transactions a month, use e-statements, and do 1 automatic payment a month (they call it ACH). Coulee Bank pays 6.01% on the first $25,000 and 1.01% on anything above that. The best thing about this account besides the rate is it is FREE, you can apply online, and it is from a great bank with real people that answer the phone. And as they like to say, Banking Green has its Rewards. The Rewards Checking account saves paper and preserves our natural resources. No wonder I feel good about recommending this to everyone I know. Check it out. I guarantee you will love it.

  48. john says:

    I use two accounts with the same bank. One for normal monthly expenses and the second as my personal “escrow” account. Each pay I tranfer 1/2 of my mortgage payment (I get paid biweekly) and 1/8 of all my quarterly bills i.e.: water, taxes, insurance…this way the money for the quarterly bills which used to feel like a surprise is always there! It works really well…in fact I have started adding an extra $250 a pay to the escrow account and and barely notice it…but can pay down the principal an extra $500 a month…cutting the length of the mortgage in half…cool stuff!

  49. Sue says:

    As John in comment#48, I also have two accounts with the same bank. One of the checking is my main account where my pay is direct despoited and other one is paying off my credit card every month and for co-pays for doctors visits.

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