When you place your money in a financial institution, the last thing you want to worry about is paying excessive charges for routine tasks like using a checking account or withdrawing money from an ATM, or leaving yourself vulnerable to fraudsters. And beyond dodging exorbitant extra fees and safeguarding your personal information, there are plenty of other common mistakes to avoid at your bank or credit union to hold onto more of your money.
If you’re wondering how to maximize banking benefits and bypass common pitfalls, review this list of gaffes to avoid and learn what steps to take instead.
Don’t: Succumb to ATM fees. Chances are, you probably use your debit or credit card more often than you withdraw cash, but when you use an ATM, make sure it is in your bank’s network. According to DepositAccounts.com, a subsidiary of LendingTree, the average ATM fee in 2017 was $2.28. Instead, sidestep out-of-network ATM fees by withdrawing cash from your own bank’s ATM. You might also want to look for a bank that promises checking accounts with no ATM fee.
Don’t: Pay a monthly maintenance fee. Many banks charge fees to open a checking account. For instance, Bank of America charges $12 per month to use a checking account, while Wells Fargo charges $10 and Chase charges $12. Fortunately, there’s usually a way to get out of paying those fees. In some cases, you need to keep a minimum balance in your bank account ($1,500 for Bank of America, Wells Fargo and Chase) to waive fees. You can set up a direct deposit with your employer to have your paycheck, or a portion of your paycheck, go directly into your account to help keep a minimum balance in your account. It may be tricky to set up a direct deposit if you’re self-employed and your income is sporadic, but if that’s the case, it may be an ideal time to switch banks.
Alternatively, there are banks that don’t charge monthly fees. Capital One doesn’t impose a monthly maintenance fee. And U.S. Bank offers a $6.95 monthly fee, rather than $8.95, for opting to forgo paper statements. While the amount you’ll save with a reduced fee may seem insignificant, think of it this way: Paying $10 to $12 a month means you’re spending $120 to $144 a year simply to have an open account.
Gabriel Pincus, president of GA Pincus Funds, a registered investment advisory firm with offices in Chicago and Allen, Texas, finds paying for the luxury of placing your money in a financial institution to be ridiculous. “It doesn’t matter if you have $100 in your account or $100,000. You shouldn’t be paying for the privilege of storing your money in a bank,” Pincus says.
Here’s another way to look at it: “If an account charges a $10 per month maintenance or service fee and you have an average balance of $1,000 in that account, you end up paying effectively a 12 percent annual fee on your money,” says John Linton, an investment advisor and founder of Elbert Capital Management in Denver.
Don’t: Pay overdraft fees. Curtailing overdraft charges might be easier said than done if you’re always lurching from paycheck to paycheck. But overdraft fees can easily become a financial headache. According to the research firm Moebs Services, last year consumers paid $34.3 billion in overdraft fees, the most since 2009 during the Great Recession.
Overdraft fees, which are typically around $35, are imposed for charges on debit cards, checks, ATM withdrawals and automatic withdrawals when there isn’t enough money in a checking account to cover the expense.
Generally, you can avoid overdraft fees by simply keeping enough money in your bank account so that you don’t go into the negative. You can ask your bank for overdraft protection, but in order to do that, you generally have to open a savings account – and keep money in the account. If your checking account goes into the negative, the bank will then take your money out of savings and charge you a smaller fee of, say, $10. In short: You may be better off trying to keep a healthy buffer of money in your checking account, or carefully monitoring exactly how much you have in your account on a daily basis.
Don’t: Take out a car loan without first applying with your bank. Auto loans are the third largest category of household debt for American consumers, behind mortgage and student loans, according to a 2016 report from the Consumer Financial Protection Bureau. The same report noted that “industry sources suggest that indirect financing accounts for a majority of all auto finance transactions.” Why is this important? Typically, banks and credit unions offer cheaper interest rates than car dealerships. So, you should shop around for an auto loan before signing on the dotted line.
“Getting preapproved will guarantee you’re getting the best rate possible, while also giving you some negotiating power when you go to the dealership,” says Dominick D’Antona, a business development and marketing manager at Central Credit Union of Maryland in Baltimore.
Don’t: Skip visiting physical branches. If your top priority is eliminating banking fees, you’d do well to visit your branch every so often. If you get to know your bank manager or the tellers at your bank, you may enjoy the added benefit of waived overdraft charges. Some consumers, of course, simply prefer online banking; however, visiting a physical location can help you cultivate a relationship with your bank. For instance, you might also find that a bank is more amenable to giving you that car loan if they know who you are, and you’re a qualified candidate with a healthy credit score and a solid credit history.
After all, it’s only human nature to make mistakes, and the best way to get a bank to forgive a banking blunder is if you get to know the humans running it.