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In our society, we recognize that banks are necessary for the efficient flow of money. We keep money in bank accounts so that it is generally safe. Most banks have FDIC insurance and other types of insurance, meant to help keep your money secure in the event the bank fails, or if the bank is robbed. For most people, the bank is a safer place to keep large amounts of money than under the mattress, and using a debit card or credit card is more secure than carrying hundreds of dollars in cash on your person.
We use banks regularly, and are used to their benefits. However, it is possible to make mistakes with your bank patronage, resulting in lower returns than you could be getting – or even in losses. Here are 10 mistakes people make with their bank accounts:
1. Not reviewing your monthly account statement
With technology allowing you to peek at your account activity online, it is easy to neglect the account statement. However, this is a mistake. Your account statement is the “official” record of transactions for the month. What is on the account statement is what goes. Reconcile your bank account statement to your personal records (personal finance software makes this very easy) each month, and look for mistakes and fraudulent charges. Also, look for fees you didn’t realize you were paying.
2. Not reading account materials and notices
It is tedious to read through privacy notices and changes to account agreements. This is important information, though. Banks notify you when fees change, and tell you whom they are sharing your information with. Protect your privacy and change banks if you don’t like new fees that are charged.
3. Keeping money in non-interest bearing accounts
Banks these days have a variety of products that allow you to earn interest. Even many checking accounts offer interest on balances. If you are keeping money in the bank, you should be earning interest on it. Consider rewards checking accounts, and money market accounts in addition to savings accounts. Just be sure to understand any minimum balance requirements or limits to withdrawals.
4. Using a “traditional” savings account
Surprising as it may be to some, there are still plenty of folks using “traditional” savings accounts that offer less than 1% annual yield. Instead, go online, or look for other financial institutions that offer high yield savings accounts. You may have to link to another account, but it’s often worth it. While no savings account is going to offer a great yield, you should at least get what you can.
5. Allowing your CDs to roll over automatically
Some CDs will automatically roll over. This may be a feature of the CD, or the financial institution may inform you that you have the option. While this may be tempting due the hassle free nature of an automatic roll over, you might be doing yourself a disservice. Before you let a CD roll over automatically, do your homework. Look for CDs with higher rates. If you can find a CD elsewhere with a higher rate, either ask your bank to honor that rate, or take your money elsewhere.
6. Borrowing from your bank without shopping around
Because you already have a relationship with your bank, it is tempting to simply go to your primary financial institution when you need a loan. If you do this without shopping around, though, you may end up paying more. Whether it’s a mortgage, car loan or credit card, if you are looking to borrow money, shop around for the best rate and look for the best deal.
7. Not shopping around for lower fees
All banks do not charge for the same services. Some banks offer lower ATM fees, or refund ATM fees. Some banks charge monthly maintenance fees, or fees if you drop below a certain balance. It is also worth noting that banks often charge different fees on different accounts. So, one account at a bank might come with higher fees than another account at the same bank. If you are dissatisfied with the fees your bank charges, shop around at other banks and look for lower fees. Also, compare accounts offered by your financial institution and choose the best deal you can.
8. Using public computers for online banking
It’s amazing to me how many times you can walk by a library computer and see someone initiating transactions. Public computers may not be secure in the same way your computer is. If you do use a public computer to check on your bank account, make sure to log out completely from your account, clear the browsing history and cache, and completely log out of the session. You also face security problems when using public WiFi on your own laptop. The level of security offered by public wireless connections is probably not the same as that of your home router. Instead, do your online banking at home. And make sure that you make it difficult for non-family members to access your home wireless network.
9. Leaving a paper trail
Many people still leave a paper trail of discarded bank statements. Even deposit slips and receipts from your bank can provide information that could be used by identity thieves. After you have verified your information with statements, or with deposit receipts, either store them in a locked file cabinet or shred them. Shredding is best. Whenever you throw out any financial information, you need to shred it first.
10. Neglecting to negotiate
Everything is negotiable. Whether it’s the interest rate on your bank-issued credit card or the fee on your checking account, it doesn’t hurt to ask for a better deal. Bankers want to keep you business. If you find a better deal elsewhere, take it to your bank, and see if it is possible to get the same deal at your current bank. If you are unhappy with a fee, you can ask about it. The worst that can happen is that you are told “no.” However, you do have to be prepared to move your money in this case.
Completely logging out of a public computer does little to protect you: the issue with public computers is that they might be running key loggers or other malware that can steal your information, such as the password you used to log in, and send it elsewhere while you use the computer.
I might like to make an addition to this article stating that phone bank is a good alternative for those of us who are uncomfortable with computer banking. Though I have used the computer for direct deposits in my reward checking account. I use the phone bank and ledger sheets to take care of the 43 Cd's and in 25 banks and credit unions. I post on the calender each Jan the Cd's that will come due.
Actually, I use a 13 column across ledger sheet with 40 lines down, and printed on both sides of the page for each CD so that I can follow the money when the CD matures. I post the banks name, phone number, address, account number, date purchased, date due, the % of the interest, the total yearly interest earned, end of year worth and the date and amount it cashed in for. This way I can also check off when I get the 1099 but usually use phone bank so that I can start my taxes early. These ledgers also are a great help for yearly worth if you do this calculation. It helps with wills, trusts etc.
If someone has designed a better way on paper will you post it.
I also make another ledger sheet with the IRA CD's with a column for traditonal and one for Roth's and Roth conversions and across the top of the page I post the name of the banks and credit unions so I can post each CD in the correct column and totaling it at the bottom of the column to make sure I am under the insurance limits while remembering to use projected interest earned. I also use a page for our regular CD's. I am not sure there is a program to take care of all of this. Ken you need to design this program. This could be your next project-----:-)
Doing things this way keeps a paper trail for our children as we are older and when the time comes when they may have to care for our financial well being or need information after we pass they have all the financial information. I have given them the combination of the safe where all the papers are.
Also one more thank you. I noticed that everytime I go into you site the state I selected is always there and does not change until I change it. This is a very convenient part of your program. I appreciate you easy you make things for us.
2. These notes apply to credit unions as well. I would include in #7 that you should shop around between banks and credit unions.
Great article, I like that someone is still putting together meaningful and helpful finance articles.
1. Check exit policy (account closure fee, loss of interest, inactivity fee, etc.)
2. Always do a test run for a few weeks before committing major funding. Some RCA accounts may require to be primary checking. Some banks may dislike certain customers (low debit transactions). It is better to find it out before being stuck with a large sum of money.
3. Check out ACH policy/speed (in/out of accounts).
4. It is always better to get some free starter checks; if not available, invest $5 to get 50 checks from cheap online places. This comes in handy when one wants to bail out (or invest elsewhere) in a hurry.