While it would be nice if you could just put your money in the bank and forget about it, that could mean losing out on opportunities to earn higher interest or take advantage of perks and rewards. It might also mean making costly mistakes, like paying overdraft fees and monthly maintenance and ATM fees. Find out how to avoid making these eight banking blunders so you can keep more money for yourself.
1. Paying a Monthly Maintenance Fee
Some banks may charge a monthly fee in the range of $10 to $15 to maintain a deposit account, like a checking account. It can be easy to get accustomed to this fee as a part of having a bank account, especially when it's deducted from your account automatically. But it's worth it to ask your bank if there's a way to waive it.
Sometimes, a bank or credit union will lower or waive this fee if you set up direct deposit, make a certain number of deposits each month or maintain a minimum balance in your account. Your bank may also waive maintenance fees if you have multiple accounts or sign up for paperless statements.
2. Covering the Cost of ATM Fees
Although many banks and credit unions do not charge ATM fees if you withdraw money at their ATMs, you may pay a fee if you use an ATM that is not part of your bank's network or when traveling internationally. Out-of-network ATM transactions can top $4 in some cases, so it's worth checking with your bank to find out which partner ATMs you can use.
Some banks may also refund ATM withdrawal fees, but limits and requirements may depend on the bank and the account. For instance, you might get a refund up to a certain dollar amount or your bank may refund your first five fees in a month.
3. Not Opening a Savings Account
Many financial institutions don't pay interest on checking accounts. Accounts that do pay interest generally offer lower rates than savings accounts.
For example, the annual percentage yield (APY) on checking accounts as of December 19, 2022, was 0.05%, according to the Federal Deposit Insurance Corporation (FDIC). On the other hand, savings accounts paid 0.3% APY, according to the FDIC, while the rate on some high-yield savings accounts can be as high as 4%.
Having all of your money tied up in a checking account can mean losing out on hundreds of dollars in interest accrual over several years. Many high-yield savings accounts also have no monthly fees or minimum balance requirements. Savings accounts can be used for many purposes, including saving up for a large purchase or event, creating an emergency fund and more.
4. Paying a Fee for Not Keeping a Minimum Balance
Not all banks charge a fee for falling below a minimum balance, but some do. All fees like this should be disclosed when you open a new account. These fees can be as much as $9 or more for interest-yielding accounts, so read the fine print before opening your account.
If your bank or credit union requires you to keep a minimum balance, the best way to avoid this fee is to maintain that balance. You can set up low balance alerts so you are notified via text or email if you dip below the minimum balance requirement.
5. Missing Out on Perks and Rewards
Some banks and credit unions offer reward and loyalty programs generally meant to acquire and retain customers. Nearly 1 in 4 people said they would switch banks if another bank offered a cash back or rewards program or a better program than their current bank, according to a recent survey by Wildfire Systems, a rewards program platform provider.
Some banks may offer rewards checking accounts, or you may also be rewarded with a higher interest rate for keeping larger balances in your accounts. By not asking if your current bank has programs such as these, you may be missing out on ways to save more money.
6. Paying Overdraft Fees
You might pay overdraft fees when you don't have enough money in your account to cover your transactions. Although the cost of these fees can vary by bank, the average charge can be around $30 per transaction. For instance, if you pay your utility bill, cellphone bill and make a rent payment all in one day, but do not have the funds to cover all three bills, you might end up paying around $60 in overdraft fees.
If you want to avoid the costly ripple effect of overdraft fees, ask your bank if they offer overdraft protection.
You might also consider linking a savings account to your checking account. If you have the funds available, the bank will pull funds from your savings account to cover the shortage in your checking account. Although your bank may charge you to do this, the fee may be less than the overdraft fee.
7. Overlooking Credit Unions or Banking Online
If you've been banking at the same bank for years, it may be difficult to think about changing to a credit union or online bank. However, by not comparing rates and terms, you may be missing out. In September 2022, the average interest rate on a $10,000, 5-year certificate of deposit (CD) at national banks was 1.12%, while the national average rate at credit unions was 1.61%, according to the National Credit Union Association.
Often, online banks are equally competitive. Because they do not have the expense of maintaining a physical location, online banks often can pass along the savings by offering better rates to their customers.
It's not uncommon to see higher APYs on savings accounts and some interest-earning checking accounts with an online bank. And, as long as your online bank is a member of the FDIC or NCUA, your money (up to federal limits) is safe.
8. Not Keeping Track of Accounts
Some banks charge a dormancy or inactivity fee if you haven't made a transaction within a certain amount of time. So, even if you've got sufficient funds in your account and you haven't done anything that would incur other fees (like make out-of-network ATM withdrawals), you could still get charged.
You also need to be aware of accounts that may renew automatically. Although you will likely receive notice beforehand, many CDs, for example, auto renew or roll over after the initial term ends. If you're not keeping track, your money might be locked up for another term without you even realizing it.
It's always best to log in to your bank's website and look over your statements often to view all of your accounts. That way, you know exactly where you stand at all times. Although bank errors are uncommon, they do happen. Frequently checking your accounts can also help you spot errors or fraud so you can act quickly.
The Bottom Line
Even if you're careful, mistakes can happen. But by avoiding these eight banking blunders, you can ensure you're growing your finances instead of breaking the bank. Start building good banking habits now to get your personal finances where they need to be—after all, you owe it to yourself.
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