Mechanics & Advantages of "Hub Banking"

[PghPharmBoy]

Hi everyone,

I've been doing some research on Bogleheads and via Google on establishing a "hub and spoke" banking system. I've got the basics down - you pick a bank into which all of your deposits are made and then you send it out from there for better interest rates, investments, etc.

I was wondering if those of you that use a "hub bank" could talk about the mechanics of how you use it and what the advantages are for you? I am considering setting up my existing Fidelity CMA as my "hub" but, to be honest, I'm struggling on the advantages of using one account or another for the hub.

I have a few accounts and they're already inter-connected via ACH Transfer:

• Credit Union (great rate on credit card; decent checking account APY; good loan rates - though not NCUA insured [as discussed in another post]) - the ACH time is overnight when pushing to other banks

• Large/TBTF National Bank (used because of number of branches and benefits from account type - no ATM fees domestic/international, free wires, etc.) - the ACH time is instant for some accounts and overnight for others

• Local Regional Savings Bank (have banked here for years; they hold my mortgage and HELOC; I have a dedicated "banker" I can call - I only really use him for lending stuff and certainly don't *need* a dedicated banker, but he is a good contact to have if things go wrong) - the ACH time is overnight with pushing to other banks

If I wasn't diligent enough in my searching and there's a thread that answers this, please feel free to send me there. Otherwise, I'm hoping those of you that do the hub model can tell me why it works for you and what you like about it.

Thanks in advance for your time!
PPB

[mega317]

I use chase, honestly for not a bunch of compelling reasons but I guess they add up.
Same accounts for like 20 years, i know the account and routing numbers by heart.
Close easy branch for cash deposits.
Already linked to all my other accounts, brokerages, TD, direct deposit, autopays.
Wife has no interest in changing her multiple direct deposits, apps, passwords, checkbook, etc.

If I was starting from scratch I would have decision paralysis because there just isn’t whole lot of deference in my life based on my primary bank.

[jebmke]

USAA is my checking account which acts as a clearing account. I have a savings account at AMEX. The checking account is linked to our Vanguard MM accounts.

[8301]

I use my big bank as a hub which may be accessed by credit card companies, credit unions, and investment houses. Fund transfer may be initiated only by spokes, but not the hub. If an account is compromised, the damage will be limited to the account and the hub, I assume.

[vaylie]

Bank of America is my hub account for all direct deposits, checks, and bill pay (since I have all my CCs with them). Part of it is that great cashback I get on their credit cards with Platinum Honors status. But the biggest part is that I like having a brick & mortar bank to go to - if anything goes wrong, I can have an in-person contact. It's also nice to know that I have a place for notary signatures, medallion, etc.

For cash savings, I'm currently in money market funds at Merrill Edge (TTTXX), but back when the MMF rates were terrible, I used Ally for savings and getting an actual interest rate rather than 0.01% at BoA.

I use Fidelity for my taxable brokerage and Schwab for my tax advantaged accounts.

[exodusNH]

Hi everyone,

I've been doing some research on Bogleheads and via Google on establishing a "hub and spoke" banking system. I've got the basics down - you pick a bank into which all of your deposits are made and then you send it out from there for better interest rates, investments, etc.

I was wondering if those of you that use a "hub bank" could talk about the mechanics of how you use it and what the advantages are for you? I am considering setting up my existing Fidelity CMA as my "hub" but, to be honest, I'm struggling on the advantages of using one account or another for the hub.

I have a few accounts and they're already inter-connected via ACH Transfer:

• Credit Union (great rate on credit card; decent checking account APY; good loan rates - though not NCUA insured [as discussed in another post]) - the ACH time is overnight when pushing to other banks

• Large/TBTF National Bank (used because of number of branches and benefits from account type - no ATM fees domestic/international, free wires, etc.) - the ACH time is instant for some accounts and overnight for others

• Local Regional Savings Bank (have banked here for years; they hold my mortgage and HELOC; I have a dedicated "banker" I can call - I only really use him for lending stuff and certainly don't *need* a dedicated banker, but he is a good contact to have if things go wrong) - the ACH time is overnight with pushing to other banks

If I wasn't diligent enough in my searching and there's a thread that answers this, please feel free to send me there. Otherwise, I'm hoping those of you that do the hub model can tell me why it works for you and what you like about it.

Thanks in advance for your time!
PPB

I use a large, regional bank (top 25 in the US) that gobbled up a local bank a lifetime ago. Plenty of branches near me and in the region.

I have two other checking accounts, one with my HELOC because it gave me a discount and one that gave me a bonus for meeting certain direct deposit requirements. I have payroll direct deposits flowing into them to meet the fee-waiver requirements. But every two weeks I either direct that money to my hub or use it to pay credit cards in happen to have at both.

I have a HYSA that also gets a deposit. That was my emergency fund / property taxes / home insurance fund, but now I keep 3 months of expenses there and pull the rest into Vanguard.

The balance of my paycheck goes to my hub bank. I keep $4000-$4500 in the account, which pays no interest. That's enough to cover my mortgage, utilities, and credit card minimum payments for 3 months. If I need to pay off a large credit card bill, I either let the cash accumulate or pull it from HYSA a few days before the credit card payment. Haven't had to do that much since last summer because I got a 0% 18 month Wells Fargo card that all eligible expenses have been going to. (That balance is being innoculated by continuing purchases of a Treasury maturing shortly before the 0% expires.)

Every two weeks, I spend about 15 minutes executing the transfers and eyeballing the accounts.

[ObiQuiet]

Here's ours. More of a waterfall than hub & spoke.



The advantages are:
* Only weekly amounts are in "exposed" accounts (far right side)
* No need to balance a check book, as the number of transactions for bill pay is small, and not mixed in with gas, groceries, etc.
* Salary direct-to-Vanguard embodies "pay ourselves first".
* Reduced temptation to spend bonuses, raises.
* His & Hers petty cash accounts reduces issues

[radiowave]

Using NCNB as my hub bank for almost 40 years. Bill pay and link to ME for surplus cash using FSIXX gives me platinum status. Was using online bank for CDs but now with treasuries more competitive using them instead now. One thing I'll mention, be careful if you use online bill pay - have a backup at another bank or brokerage in case the primary hub bank has an interruption and check the ACH link every so often.

[PghPharmBoy]

I use my big bank as a hub which may be accessed by credit card companies, credit unions, and investment houses. Fund transfer may be initiated only by spokes, but not the hub. If an account is compromised, the damage will be limited to the account and the hub, I assume.

So, if I’m reading this right, you pay everything from the hub but you don’t ever push money from the hub to the spokes? You always do a pull?

And, probably a dumb question, but do you have other bank accounts as spokes or are your spokes the credit cards, investment houses, etc.? If you do have “spoke” banks/credit unions, is there a specific purpose and have you tried to optimize to minimize the number of spoke banks/CUs?

I ask because this is my issue - I struggle with “meh” reasons for keeping accounts open but don’t really have a cohesive plan for how I’m using them. Simplifying sounds awesome but then you read about having backup institutions in case your main bank/CU has an issue (security issue; IT issue; bond duration issue; etc )

[PghPharmBoy]

Bank of America is my hub account for all direct deposits, checks, and bill pay (since I have all my CCs with them). Part of it is that great cashback I get on their credit cards with Platinum Honors status. But the biggest part is that I like having a brick & mortar bank to go to - if anything goes wrong, I can have an in-person contact. It's also nice to know that I have a place for notary signatures, medallion, etc.

For cash savings, I'm currently in money market funds at Merrill Edge (TTTXX), but back when the MMF rates were terrible, I used Ally for savings and getting an actual interest rate rather than 0.01% at BoA.

I use Fidelity for my taxable brokerage and Schwab for my tax advantaged accounts.

So is it fair to say you do all of your banking at BoA except when rate differences make Ally more attractive? Is there a practical reason for separating taxable from tax-advantaged brokerages, like security or product offerings?

Right now, my “big” bank is Chase and I have all of my major investments in JPM self-directed accounts (brokerage, Roth, tIRA [which is only used for back door Roths], and some money in their robo - which I actually like!). I’m leaving an employer with an HSA option for one that doesn’t offer an HSA-eligible medical plan, so I’ll be opening a Fidelity HSA to rollover my existing account. I have some straggly brokerage stuff and my CMA there, too, so that’s why consolidation/hub banking is on my mind.

Thanks for the feedback!

[PghPharmBoy]

I use a large, regional bank (top 25 in the US) that gobbled up a local bank a lifetime ago. Plenty of branches near me and in the region.

I have two other checking accounts, one with my HELOC because it gave me a discount and one that gave me a bonus for meeting certain direct deposit requirements. I have payroll direct deposits flowing into them to meet the fee-waiver requirements. But every two weeks I either direct that money to my hub or use it to pay credit cards in happen to have at both.

I have a HYSA that also gets a deposit. That was my emergency fund / property taxes / home insurance fund, but now I keep 3 months of expenses there and pull the rest into Vanguard.

The balance of my paycheck goes to my hub bank. I keep $4000-$4500 in the account, which pays no interest. That's enough to cover my mortgage, utilities, and credit card minimum payments for 3 months. If I need to pay off a large credit card bill, I either let the cash accumulate or pull it from HYSA a few days before the credit card payment. Haven't had to do that much since last summer because I got a 0% 18 month Wells Fargo card that all eligible expenses have been going to. (That balance is being innoculated by continuing purchases of a Treasury maturing shortly before the 0% expires.)

Every two weeks, I spend about 15 minutes executing the transfers and eyeballing the accounts.

Thanks for this! You’ve inadvertently hit on another issue I’m trying to prepare for. My current employer allows me to send direct deposits to up to 3 different institutions. The new employer, to my knowledge, does not. That’s another reason I’ve considered the hub and spoke model and have done some tests of ACH speed. If it all goes to one account, can I reasonably expect money to move quickly to the other accounts I have now. Fidelity seems very capable of same-day pushes and credits for all my connected accounts.

I’ve also read some posts where people don’t let outside companies pull funds because your account number is out there and it could be hacked; they use bill pay/pushing instead. This has a ring of truth to it for me, but TBH, I’ve had “pulls” from my checking(s) for years w/out issue.

[PghPharmBoy]

Here's ours. More of a waterfall than hub & spoke.



The advantages are:
* Only weekly amounts are in "exposed" accounts (far right side)
* No need to balance a check book, as the number of transactions for bill pay is small, and not mixed in with gas, groceries, etc.
* Salary direct-to-Vanguard embodies "pay ourselves first".
* Reduced temptation to spend bonuses, raises.
* His & Hers petty cash accounts reduces issues

Wow. I really appreciate the graphic. I’ll admit I had to study it for awhile to wrap my head around it.

You have automated pushes from VG to WF, Ally, and Venmo - is that a set amount based on budget/expected spend? Do you send everything to VG to gain the benefit of the rate on the settlement account and ease of making investments? Or is there another practical reason for sending everything through VG?

I never really considered making a non-cash management account my “hub” (or the headwaters of the waterfall )

[PghPharmBoy]

Using NCNB as my hub bank for almost 40 years. Bill pay and link to ME for surplus cash using FSIXX gives me platinum status. Was using online bank for CDs but now with treasuries more competitive using them instead now. One thing I'll mention, be careful if you use online bill pay - have a backup at another bank or brokerage in case the primary hub bank has an interruption and check the ACH link every so often.

Wow, NCNB! I haven’t seen them since I lived in SoFla in the ‘80s (and was too young to pick my own bank!)

I appreciate the info and the bill pay callout. That sounds like the voice of experience. When you say “check the ACH link every so often,” can you elaborate? My experience will bill pay is that you either set up the recipient or not, but I’m sure I’m just not connecting with what you’re calling out.

Thanks for the info!

[8301]

I use my big bank as a hub which may be accessed by credit card companies, credit unions, and investment houses. Fund transfer may be initiated only by spokes, but not the hub. If an account is compromised, the damage will be limited to the account and the hub, I assume.

So, if I’m reading this right, you pay everything from the hub but you don’t ever push money from the hub to the spokes? You always do a pull?

And, probably a dumb question, but do you have other bank accounts as spokes or are your spokes the credit cards, investment houses, etc.? If you do have “spoke” banks/credit unions, is there a specific purpose and have you tried to optimize to minimize the number of spoke banks/CUs?

I ask because this is my issue - I struggle with “meh” reasons for keeping accounts open but don’t really have a cohesive plan for how I’m using them. Simplifying sounds awesome but then you read about having backup institutions in case your main bank/CU has an issue (security issue; IT issue; bond duration issue; etc )

I have a large local bank as a hub, credit unions, and other financial institutions. Two of the credit unions are local and the other is several hours by car. All the external money inflows and outflows (deposits, payments, cash transactions) are through the hub. I don't want to link all of them together point-to-point. If there is any issue at any point, it may affect every point.
In my setup, only spokes may initiate transactions to the hub and the hub is passive.
1) If the hub is compromised, the damage is confined to the hub.
2) If a spoke is compromised, the damage is confined to itself and the hub. The rest of the spokes is intact.

[ObiQuiet]

You have automated pushes from VG to WF, Ally, and Venmo - is that a set amount based on budget/expected spend?

Yes. We adjust the amounts maybe once a year or less, to be comfortable, but not leave much excess each week or month in the downstream accounts.

For the little discretionary accounts, this works pretty well since if we run short it's less than a week to be topped off again. For the WF bill pay account, if it gets too fat, we skip a transfer from VG. Budgeting is implicit, and by separating bills from coffee shops not really necessary to pay attention to.

Do you send everything to VG to gain the benefit of the rate on the settlement account and ease of making investments? Or is there another practical reason for sending everything through VG?

Those two reasons, for sure. Plus:
* we think it protects the whole system should a lesser and more exposed account be compromised and need to be closed.
* reduces the temptation to not save, in that the "means" that we live within are controlled by the transfers out of VG, and not by having to decide each paycheck how much to save by moving out of checking. Out of sight, out of mind.

Frankly, it works well for us as we handle the concept "I have this much, this week" better than we do "Don't spend it all".

[exodusNH]

I’ve also read some posts where people don’t let outside companies pull funds because your account number is out there and it could be hacked; they use bill pay/pushing instead. This has a ring of truth to it for me, but TBH, I’ve had “pulls” from my checking(s) for years w/out issue.

And every check you've ever written has that data slapped all over it.

The ACH process seems insecure, but liability rests with the company initiating the pull. It doesn't mean you won't get annoyed if you get a fraudulent pull, but the process is designed to be reversible for quite some time (10-30 days.)

I let the vendors pull from my account, because that puts me in a better position if a payment fails. I'm not someone who runs their checking account at bare minimums, like some do here. If the electric company pulls by bill twice, it's not going to cause a cascade of NSFs.

[Doctor Rhythm]

We have accounts with a national brick and mortar bank that we use for everyday, real-world money movement such as salary direct deposit and paying bills. We also have larger accounts with an internet bank that interfaces with brokerages and tax collectors. Brick & Mortar for when I’m proletariat and Internet for when I’m bourgeoisie.

I always have recurring bill payments pulled rather than pushed. Money transferred between banks or brokerages is usually pushed (via ACh or Zelle) when that’s faster, but I’m fine letting institutions pull if it’s more convenient.

[bling]

OP, i think you're overthinking this a bit. most of us are already doing "hub banking" whether implicitly or explicitly because we get paychecks.

money goes into your checkings account, and since the money is already there, it's easy to just pay off any bills from this account as well. anything that's left over, you transfer to other places that get the best yield based on your risk tolerance, whether it be stocks, CDs, savings, etc.

most banks support Zelle these days, so doing instant transfers with yourself are very easy, so it's not like many years back where you'd have to wait 2-3 days for ACH to clear.

[vaylie]

So is it fair to say you do all of your banking at BoA except when rate differences make Ally more attractive? Is there a practical reason for separating taxable from tax-advantaged brokerages, like security or product offerings?

Yep, I pretty much do all my regular banking stuff at BoA unless the rates shake out in Ally's favor compared to the Merrill money market funds.

I decided on putting all my tax advantaged accounts at Schwab because my employer has the SDBA offering with them. So I have to have an investment account there either way. May as well get all my tax advantaged investments into the same place. I didn't put my taxable there because I wanted to invest in two different sets of funds for tax loss harvesting convenience and Fidelity had fractional shares for ETFs. So my tax advantaged investments are in one family (e.g. SWTSX), while I have VTI/VXUS in Fidelity & Merrill.

[radiowave]

Using NCNB as my hub bank for almost 40 years. Bill pay and link to ME for surplus cash using FSIXX gives me platinum status. Was using online bank for CDs but now with treasuries more competitive using them instead now. One thing I'll mention, be careful if you use online bill pay - have a backup at another bank or brokerage in case the primary hub bank has an interruption and check the ACH link every so often.

Wow, NCNB! I haven’t seen them since I lived in SoFla in the ‘80s (and was too young to pick my own bank!)

I appreciate the info and the bill pay callout. That sounds like the voice of experience. When you say “check the ACH link every so often,” can you elaborate? My experience will bill pay is that you either set up the recipient or not, but I’m sure I’m just not connecting with what you’re calling out.

Thanks for the info!

I typically send just a few cents, e.g. $0.10 via the backup ebillpay to each linked account every few months just to make sure the link is still active. I typically pay bills every 2 weeks or so and sometimes switch to the other ebillpay just to even out cash flow. My "system" is not as complex as above diagram but does involve 2 banks, one brick and mortar (a la Bank of America), one online, and two brokerages. I'm in the process of closing out the online bank to simplify things a bit.

If you haven't read the long running Fidelity thread viewtopic.php?t=266538 take a look at using Fidelity cash management accounts as a backup to a bank hub. Its a long thread but the synthesis is that Fidelity has some excellent cash management tools, ebill pay, treasuries and auto roll, and full brokerage services. Personally I wouldn't use Fidelity as a one stop shop (all my eggs in one basket).

[MrJedi]

I chase bank account bonuses so I have multiple bank accounts. I close the ones that allow you to get the bonus again after a cool down period but I tend to keep some of the ones that are a once/lifetime bonus. Those ones that I keep around act as burner accounts for me where I do not care so much about exposing their account numbers for new links, Plaid, etc. It also gives me plenty of options for transferring money as needed, as sometimes establishing new links can be finicky.

I do have a primary checking and a primary hub. I use the hub to connect to the web of burner/bonus chasing accounts in order to keep it clean from my primary checking. Kind of like a firewall I guess.

I also don't stay married to any single bank. Chasing bonuses has made me comfortable with staying nimble with moving money around and also not so reliant on a single interface to money and can easily move if there is a more competitive product elsewhere.

[PghPharmBoy]

I have a large local bank as a hub, credit unions, and other financial institutions. Two of the credit unions are local and the other is several hours by car. All the external money inflows and outflows (deposits, payments, cash transactions) are through the hub. I don't want to link all of them together point-to-point. If there is any issue at any point, it may affect every point.
In my setup, only spokes may initiate transactions to the hub and the hub is passive.
1) If the hub is compromised, the damage is confined to the hub.
2) If a spoke is compromised, the damage is confined to itself and the hub. The rest of the spokes is intact.

Got it! Thanks for the additional detail!

[PghPharmBoy]

You have automated pushes from VG to WF, Ally, and Venmo - is that a set amount based on budget/expected spend?

Yes. We adjust the amounts maybe once a year or less, to be comfortable, but not leave much excess each week or month in the downstream accounts.

For the little discretionary accounts, this works pretty well since if we run short it's less than a week to be topped off again. For the WF bill pay account, if it gets too fat, we skip a transfer from VG. Budgeting is implicit, and by separating bills from coffee shops not really necessary to pay attention to.

Do you send everything to VG to gain the benefit of the rate on the settlement account and ease of making investments? Or is there another practical reason for sending everything through VG?

Those two reasons, for sure. Plus:
* we think it protects the whole system should a lesser and more exposed account be compromised and need to be closed.
* reduces the temptation to not save, in that the "means" that we live within are controlled by the transfers out of VG, and not by having to decide each paycheck how much to save by moving out of checking. Out of sight, out of mind.

Frankly, it works well for us as we handle the concept "I have this much, this week" better than we do "Don't spend it all".

Got it - this adds color to the diagram and gives me some good points to consider. Thanks for sharing the additional detail.

[PghPharmBoy]

OP, i think you're overthinking this a bit.

Oh, no doubt. There’s nothing too trivial that it can’t be overthought

most banks support Zelle these days, so doing instant transfers with yourself are very easy, so it's not like many years back where you'd have to wait 2-3 days for ACH to clear.

I am embarrassed to admit I don’t know how to Zelle myself…I’ll have to google that!

[PghPharmBoy]

I typically send just a few cents, e.g. $0.10 via the backup ebillpay to each linked account every few months just to make sure the link is still active. I typically pay bills every 2 weeks or so and sometimes switch to the other ebillpay just to even out cash flow. My "system" is not as complex as above diagram but does involve 2 banks, one brick and mortar (a la Bank of America), one online, and two brokerages. I'm in the process of closing out the online bank to simplify things a bit.

If you haven't read the long running Fidelity thread viewtopic.php?t=266538 take a look at using Fidelity cash management accounts as a backup to a bank hub. Its a long thread but the synthesis is that Fidelity has some excellent cash management tools, ebill pay, treasuries and auto roll, and full brokerage services. Personally I wouldn't use Fidelity as a one stop shop (all my eggs in one basket).

Thanks - I hadn’t considered sending micro deposits or micropayments to ensure the links are still active. Good call out. I’ve perused that Fidelity thread and have found some good info there. Appreciate the additional info.

[PghPharmBoy]

And every check you've ever written has that data slapped all over it.

Right. I have thought that myself!

The ACH process seems insecure, but liability rests with the company initiating the pull. It doesn't mean you won't get annoyed if you get a fraudulent pull, but the process is designed to be reversible for quite some time (10-30 days.)

I let the vendors pull from my account, because that puts me in a better position if a payment fails. I'm not someone who runs their checking account at bare minimums, like some do here. If the electric company pulls by bill twice, it's not going to cause a cascade of NSFs.

I hadn’t thought about the implications of failed payments. I, like you, don’t over-optimize and run my account down to the bare minimums so I don’t worry about running the account into NSF status.

[PghPharmBoy]

I chase bank account bonuses so I have multiple bank accounts. I close the ones that allow you to get the bonus again after a cool down period but I tend to keep some of the ones that are a once/lifetime bonus. Those ones that I keep around act as burner accounts for me where I do not care so much about exposing their account numbers for new links, Plaid, etc. It also gives me plenty of options for transferring money as needed, as sometimes establishing new links can be finicky.

I do have a primary checking and a primary hub. I use the hub to connect to the web of burner/bonus chasing accounts in order to keep it clean from my primary checking. Kind of like a firewall I guess.

I also don't stay married to any single bank. Chasing bonuses has made me comfortable with staying nimble with moving money around and also not so reliant on a single interface to money and can easily move if there is a more competitive product elsewhere.

Interesting perspective - thanks!

[bling]

most banks support Zelle these days, so doing instant transfers with yourself are very easy, so it's not like many years back where you'd have to wait 2-3 days for ACH to clear.

I am embarrassed to admit I don’t know how to Zelle myself…I’ll have to google that!

Zelle is tied to either a phone number or email. the latter of which is super easy to create for free at various sites.

[PghPharmBoy]

I appreciate everyone’s feedback. I guess my overarching goal was to see if I could make my current setup more efficient with some of the changes that are coming with my job change and also to make it easier to manage.

You’ve all given me a lot to consider!

[SnowBog]

I guess mine is maybe a "modified hub"...

From a "hub" perspective - I use a Fidelity CMA - with a nominal amount of $ (mostly to maintain a MM fund that pays higher than a core position). It is the only account with an outside link - either in or out. The idea being if I need to move money from institution A to institution B - it "flows" through the "hub".

As an example, the "hub" account is the only linked account to my HMBradley account (which used to be my "savings" account, although most of that has been moved into Fidelity and into T-Bills - but not relevant for this example). [Most years] We'd accumulate "cash" into HMBradley account, such that by end of year we'd have enough to front-load IRA, HSA, 529, and I & EE Savings bonds. By 1/1 we'd "pull" the funds from our "savings" account into the "hub" account. And then the money is either "automatically" withdrawn from the hub account (for example, IIRC our IRA's and 529 have an "automatic" investment to pull from the "hub", manually transferred (for example the HSA is funded from payroll - but we backfill "checking" since our net pay is reduced), or left for external use. Buying our I & EE Bonds from Treasury Direct is a great example of this last scenario, as the only account linked to TD is our "hub" account.

This setup make's it easy for us to "change" accounts - like when we switched from HMBradley as our "savings" account to using a different Fidelty CMA with T-Bills as our "savings" account. I just did the "transfer" from my other Fidelity account instead of HMBradley, and everything else worked the same. I don't have to worry about needing to "change links", change "automatic" investments/transfers/etc.. And the only "maintenance" is if/when we "add" a new account - and we just need to link that account once with our "hub" account - and then via the hub we can send/receive money between all of our accounts (without change).

As noted, we keep a nominal amount in the account - if it makes it simpler - think of the account as having $0 normally. Which also means that should any of our "links" and/or our "accounts" be compromised - there is normally $0 in the account that could be "stolen". Conversely, if there is money in the account - it's a sign I need to do something with it! For example, any dividends/interest in our "taxable" Fidelity accounts are automatically "swept" into this "hub" account, as is any "excess income" from my paycheck. So, if I see any money in the "hub" account - unless it was "waiting" there for something else (such as buying I & EE Bonds) - it's "waiting" to be moved/invested as per my AA.

The "modified" part is that we still do the bulk of our "transactions" through our "checking" account, which has checks, an ATM/debit (that we rarely use), handles auto-pay on credit cards/utilities/etc., as well as has direct deposit configured. This ultimately was simpler for us - as it separates our "normal expenses/income" from our "other stuff". As an example, let's say we spend $5k a month, our direct deposit is setup to put $5k a month into "checking" and anything beyond (aka "excess income") goes into our "hub" account (actually some flows to other accounts too that have DD requirements - but not relevant). For example, let's say I get a bonus, that "excess" shows up in my "hub" account - where I can easily see "oh I need to do something with that money". And then my process looks something like:

• Add to "checking" if its running low...
• Add to "savings" until I'm at my "target" cash (as a reminder, I try to accumulate enough "cash" to front-load next years investments)
• Invest anything else as per my AA (aka move funds to my brokerage account and buy more stocks or bonds as needed to maintain my AA)

This "modified" part - with things like direct deposit, auto payments, etc. configured could have more "work" if we ever switch checking... But candidly, I don't see that as likely... Fidelity CMA has been awesome for us - we can use a higher rate MM fund if we want, no fee on ATM, fits into our [mostly] "one-stop-shop" with Fidelity, etc. Fidelty would have to end its CMA/checking offering, or something else "amazing" would have to exist for us to even consider that... As such - this works for us. It's not exactly a "full hub" - but works for our needs.

[Doctor Rhythm]

I am embarrassed to admit I don’t know how to Zelle myself…I’ll have to google that!

I’m registered with Zelle at one bank using an email address and at another bank with my mobile #. This lets me send money to myself at the target bank.

[chassis]

Hi everyone,

I've been doing some research on Bogleheads and via Google on establishing a "hub and spoke" banking system. I've got the basics down - you pick a bank into which all of your deposits are made and then you send it out from there for better interest rates, investments, etc.

I was wondering if those of you that use a "hub bank" could talk about the mechanics of how you use it and what the advantages are for you? I am considering setting up my existing Fidelity CMA as my "hub" but, to be honest, I'm struggling on the advantages of using one account or another for the hub.

I have a few accounts and they're already inter-connected via ACH Transfer:

• Credit Union (great rate on credit card; decent checking account APY; good loan rates - though not NCUA insured [as discussed in another post]) - the ACH time is overnight when pushing to other banks

• Large/TBTF National Bank (used because of number of branches and benefits from account type - no ATM fees domestic/international, free wires, etc.) - the ACH time is instant for some accounts and overnight for others

• Local Regional Savings Bank (have banked here for years; they hold my mortgage and HELOC; I have a dedicated "banker" I can call - I only really use him for lending stuff and certainly don't *need* a dedicated banker, but he is a good contact to have if things go wrong) - the ACH time is overnight with pushing to other banks

If I wasn't diligent enough in my searching and there's a thread that answers this, please feel free to send me there. Otherwise, I'm hoping those of you that do the hub model can tell me why it works for you and what you like about it.

Thanks in advance for your time!
PPB

No need for spoke except for loans. Use Fidelity as a one-stop shop and do your lending wherever it seems best to you. Fidelity offers a credit card and fee-free ATM. Good yields on money market "cash" positions. Plus taxable brokerage and tax-advantaged (IRA, 401k).

Seek simplification. Your idea sounds rather the opposite.

[tonyclifton]

Here's ours. More of a waterfall than hub & spoke.

Great chart!