Much of what I learn is taken from what I have seen at work. As previously mentioned, I work at a bank. Every day, I see customers who help pay my salary. Sadly, these customers are angry or frustrated with the bank that they constantly pay fees. Overdraft fees and maintenance fees make big profits for banks. What many people are not willing to admit is that the fees they are paying are their own fault. Furthermore, they don’t realize how to avoid paying $25-35 dollars for every overdraft that occurs.
In the beginning, I took pity on these customers who were facing such hardships. I would listen intently and feel so bad for them that I would refund many or all of the fees for these customers who had a medical emergency, funeral, car accident, pending foreclosure or any other setback that caused them to overdraft their account. I also got in trouble many times at work for refunding these fees. My superiors argued that I was taking profits from the bank, in so many words. The empathy I would feel soon turned into pity. Eventually, it got to the point that I would see many of the same customers over and over again. Now the pity was morphing into contempt. I would come to realize that it was not my responsibility to automatically correct errors that these people have made by eliminating the penalties. It was, conversely, my responsibility to educate these people so I would not have to help them with the same problems again and again.
-Find an Account Without Fees:
This step is the simplest of all. Shop around a little and you will be able to find a bank account that is right for you. An account that is free to use. A savings account may be necessary to ensure a free checking. Many banks will have you setup a predetermined transfer amount to savings weekly or monthly. Some will require a minimum balance in the checking account, and others may require direct deposit from your employer to set up an account without fees. Some banks ask for nothing to set up a free account for you, so do your research and I promise that it will be easy to find an account that you do not pay monthly or annually for.
-Never miss a transaction:
One of the responsibilities of operating a checking account is to keep your own records. Too many people in today’s age depend on online banking or phone banking to keep their balance for them. In the “old days” of checking accounts, the only transactions that needed record were the checks you wrote, and the cash you withdrew from the bank. It is much more complicated now. You may have online billpay, automatic debits, direct deposit, checks and point of sale purchases made with your debit card. It can be very difficult to manage all of the transactions coming in and going out of your account, but is still very necessary to avoid paying the bank. Looking at transactions online, while a great resource, is not 100% accurate. There are many transactions that can fall through the cracks before actually posting to the account, there are also transactions that may take a long time to show up online. Without proper records on your end, your numbers will never match your statement.
At most banks, overdraft fees range from $25-35 dollars and can cripple your finances. Get two or three of these and you are liable to get stuck in a cycle of overdrafts. I’ve seen literally hundreds of people who get caught in this trap. Initially, overdraft fees occur that the customer is unaware of. After the fees post, the customer thinks that they have far more in their account than they actually do. Because of this, they continue to spend like normal, and those transactions generate more fees. Until a hefty sum is paid to the bank, the customer will be stuck in this cycle. I have seen some customers pay thousands to the bank because of this cycle. It is usually the people who can ill afford to lose even a few dollars that fall into this trap.
The Bank Should be Paying YOU!!
Although at many banks, you will be hard pressed to find an interest bearing Checking account, banks still pay customers.
Savings Accounts pay a predetermined percentage amount of interest to customers. Most of these accounts are probably not the ideal place to hold larger sums of money, but are nonetheless a safe place to hold some of your cash.
CD’S are timed deposit accounts that usually offer a higher interest rate in exchange for having your funds “locked” for a period of time. With CD’s, your money is still available to you if absolutely necessary, but a penalty will be paid if you withdraw money before the term of the CD has not reached it’s maturity date.
IRA’S are retirement accounts. Without too much detail (I’ll save that for another post), you can choose from a few different types of IRA’s. They are designed to earn compound interest until you are ready for retirement. I could go on and on about IRA’s, so I will leave it at that. You can learn much more about specifics of IRA’s HERE.
Regardless of what types of accounts you hold, I want you to know that you should NEVER PAY THE BANK!!! They should be paying you.