Banking on Savings – Working Around Your Bank’s Fees
Believe it or not, your bank may not have your best interests at heart. A bank is a business, just like any other. They are in business to make money for their shareholders. Those who do not understand banking may not realize how a bank makes money. There are three main ways.
• Interest paid on loans and credit cards
• Investment income
• Customer fees
All banks charge fees of some kind. The most common ones take the form of fees for carrying credit cards, monthly maintenance fees assessed to checking and savings accounts, overdraft fees that are assessed when a checking account customer bounces a check or otherwise overdrafts their account, and penalty fees which are assessed for early withdrawals from time deposit accounts like CDs and IRAs.
Fortunately control of these fees is within your reach. Most banks offer some way to avoid the monthly maintenance fees on checking and savings accounts. This usually involves maintaining a minimum balance of some kind in the account. Sometimes simply having your payroll directly deposited into the account is enough to waive the fees. When choosing a bank, be sure to closely examine the fees and stipulations of the accounts they offer and choose one that you know you can meet the requirements of.
Overdraft fees can be avoided by careful money management. If your bank supplied you a debit card that can be used for purchases, track those purchases the same way you would a paper check by writing it in your register and deducting it from your balance. This seems obvious, but customer failure to correctly track debit card spending is the number one reason for account overdrafts, according to sources at Bank of America.
Penalty fees can be avoided by leaving investments alone unless absolutely necessary. Prepare for the eventuality of needing CD funds in an emergency by establishing a CD laddering system that consists of multiple small CD investments as opposed to one big one. Leave IRAs alone unless there is no other way out of the situation that you need funds for. That money is for your retirement and should be dipped into as a last resort only.
Bank fees can be a thorn in many consumers’ sides, but with a little money management skills, you can turn it around and make the bank pay you instead of the other way around. That’s the way it should be.