There’s enough to worry about already. So when you put your hard-earned cash in the bank, you shouldn’t have to deal with extra fees for basic things like keeping your bank account open, using an ATM, or security protections. Besides costly penalties and keeping your details safe, your financial institution likely charges for other services, too.
If you want to keep as much of your money as possible, avoiding these charges is in your best interest. US News My Money explains five common banking mistakes and how to avoid them.
Banking Mistake #1: Paying ATM Fees
Most people use their debit or credit cards instead of cash, but if you need to use an ATM, try not to use one outside of your bank’s network.
According to data from DepositAccounts.com, consumers paid an average of $2.28 per withdrawal in 2017. If you can, steer clear of out-of-network ATMs and only use machines within your bank’s network. You could so search for financial institutions that reimburse its customers for ATM fees.
Banking Mistake #2: Paying Monthly Maintenance Fees
Most financial institutions charge to open an account. This amount varies from bank to bank, but it’s something you shouldn’t have to pay.
If you want to avoid monthly maintenance fees, ask your bank if they waive them for customers who meet specific criteria, such as maintaining a minimum balance. You could have your employer deposit your paycheck directly into your account to meet this requirement. However, if you’re a freelancer or self-employed, setting up a direct deposit may be a little harder.
You might want to consider switching banks if you can’t get this fee waived. Many banks don’t charge maintenance fees, saving you a significant amount of money in the long-run.
Gabriel Pincus is the president of GA Pincus Funds, a registered investment advisory group. He told US News My Money that paying to keep your bank account open is 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.”
John Linton, an investment advisor who started Elbert Capital Management, agreed. “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,” he said.
Banking Mistake #3: Paying Overdraft Fees
When you live paycheck-to-paycheck, avoiding overdraft fees isn’t as simple as it sounds. However, these charges are one of the most aggravating costs. According to Moebs Services, a research company, Americans paid $34.3 billion for overdrafts in 2019 — the highest rate since 2009.
Usually, you can prevent overdraft fees by ensuring you have enough funds in your account before swiping your debit card, making a payment, or withdrawing cash. You could also request overdraft protection from your bank, but this typically requires a savings account (which also requires a balance).
Overdraft protection doesn’t completely eliminate fees, however. You’ll still pay, but it will be less than a full-on overdraft. If you struggle with overdrafts, your best bet may be simply checking your bank account to make sure you know your balance every day.
Banking Mistake #4: Getting An Auto Loan Somewhere Besides Your Bank
A 2016 report from the Consumer Financial Protection Bureau found that car loans are the third-largest type of debt for Americans. In the study, researchers wrote that “industry sources suggest that indirect financing accounts for a majority of all auto finance transactions.”
Why doesn’t this matter to you? Because usually, financial institutions have more affordable rates compared to car dealerships. So the next time you’re looking for a vehicle, make sure you check with your bank before getting a loan from a dealership.
“Getting preapproved will guarantee you’re getting the best rate possible, while also giving you some negotiating power when you go to the dealership,” Dominick D’Antona, business development and marketing manager at Central Credit Union, told US News My Money.
Banking Mistake #5: Not Visiting Your Bank In-Person
If getting rid of banking fees is at the top of your list, then you might consider visiting your local branch every once in a while. This allows you to get acquainted with the staff, who may be more willing to help you if you need a favor.
Granted, the pandemic may not be the time to do this, but it’s something to consider once things return to normal.
- Williams, Geoff. “5 Banking Blunders You Don’t Want to Make.” U.S. News & World Report, U.S. News & World Report, 31 July 2018, money.usnews.com/banking/articles/banking-blunders-you-dont-want-to-make.