Costly Banking Mistakes and How to Avoid Them

6791146971_77854f2e22Photo courtesy of  TrentTSD*

Banking was so much easier when you were 10 years old. Back then, your one and only financial decision was when and where to crack open your piggy bank. Your 5th grade self didn’t know how good he had it, and likely spent a fair amount of time wishing to be a grown-up.

Fast forward a few decades and here you are in the present with the modern version of a piggy bank: a real, live, official bank account. With statements and everything! (Paper optional in today’s eco-friendly world.)  When that bank account is full of numbers, everybody’s happy. However, along with grown-up banking comes a lot of rules and responsibilities. It turns out that a real-life bank has a lot more rules then your parents did when they handed you your allowance every week. And while most of us fully realize the impact of significant negative financial activity (like foreclosure or bankruptcy) on our credit rating, the nation’s largest banks have recently begun amassing some other information about you from a relatively unknown database. The main informer is known as ChexSystems; a company that gathers and shares pertinent information about the simple matter of your daily banking habits. To date, over a million people have been essentially “blacklisted from the mainstream [U.S.] financial system” due to relatively minor banking infractions, like a bounced check.

Whether you’re just beginning your foray into financial independence or if you’re looking for ways to improve your money management, we’ve compiled a list of common banking mistakes and how to avoid them. We’ve also included some solutions for those of you, who (like many of us) have already landed smack dab in the middle of one of these unfortunate and often costly situations:

  • Do you feel a draft over there? At up to $35 per transaction, over-drafting your account can get expensive in a hurry. Common reasons over-drafts occur include spouses sharing the same bank account and not keeping track of your spending. If you’ve overdrawn your account, deposit cash or transfer money from savings as quickly as possible to avoid further over-drafts and charges. Then, contact your bank’s customer service department and explain the mistake and what you’re doing to remedy it. Ask to have the overdraft fees removed, and if they refuse, ask to speak to a manager.
  • Practicing your limbo skills. Leave the catch phrase “how low can you go?” on the skating rink floor! If your bank has a minimum balance policy, set up email or text alerts for when your balance dips too low for comfort, but above the minimum balance amount. Doing so will help you avoid minimum balance and overdraft fees.
  • Post-dating (and not the ‘dinner and a movie’ kind). Insider information from bank tellers shows that they rarely look at the date on checks deposited due to the high volume of paperwork they deal with on a daily basis. If the money’s not in your account, don’t write the check. Post-dating rarely ever works.
  • Living separate lives. While it’s imperative that you have relatively easy access to your savings account in case of an emergency, it’s good practice to hold your checking and savings accounts at two separate institutions.  Keeping them both together at the same bank makes it too easy to transfer money from your nest egg any time you feel like it.
  • Run, Forrest, run!  Ask if a bank has a “universal default clause” before you even open an account. If they answer in the affirmative, run, do not walk, to a bank that does not have such a clause. This clause gives banks the authority to view all of your credit accounts and, in turn, give you a higher interest-rate if you have been late on any payments.
  • Don’t help the bank make $$. While (as we’ve said), it’s a good idea to pad your checking account to avoid bounced checks, some people take it a little too far. Banks love this quirky human trait, because, if you kept your extra money in your savings account, (where it should be) the bank would be paying you interest on it.
  • “It’s all Greek to me!” Reading the fine print on important documents in your life should be required, and this includes all of the terms on your checking and/or savings accounts. Read it all, whether you think you’ll understand or not. Ask your banker to explain anything you have questions about before you sign on the dotted line. Once you give them your John Hancock, you’ll be hard-pressed to get out of any contracts without paying a hefty sum.

Most importantly, stay humble if and when you’ve made any banking errors. Your financial well-being is your responsibility. Everyone makes mistakes, so don’t be too hard on yourself, but don’t look for a scapegoat either. Do what you can to remedy the situation and start keeping a better eye on your money. To do otherwise will put you on a slippery slope, headed in the wrong direction. If you find yourself at the bottom of the slope, don’t just sit there. The only way up and out is asking for help when you need it.

*Photo has been edited from its original format

One Response to Costly Banking Mistakes and How to Avoid Them

  1. Pingback: Got Gift Cards? Spend them Wisely This Year | Veitengruber Law

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