Although your transactional checking account is meant to provide you with a safe and easy way to spend and save, common mistakes and mishaps can often lead to a slow cash flow hemorrhage.
Keep more money you earn by avoiding some of these common checking account pitfalls:
Not Using Online Banking
Not an adept record keeper and have a hard time remembering when you last withdrew cash or paid with your debit card? With online banking you shouldn’t have to write down every single purchase. Log on at least daily to keep up with transactions and maintain your minimum monthly balance (or at least keep your account in the positive range). Most credit unions today offer online banking in real time so lag is non-existent or minimal.
Relying on Overdraft Privilege
Overdraft privilege was designed to provide you with protection against the occasional checking account “oops.” However, for some checking account holders, overdraft privilege has become more of a commonplace occurrence in an effort to purchase more than what is available in the checking account. Because many financial institutions will charge up to $35 per overdraft, you could end up paying more than $100 a month by leaning on this crutch. Double checking online banking and smarter budgeting can help you avoid these “oops” occurrences.
Checking account holders can even use certain alert settings through online banking. “If you do choose overdraft protection, ensure you have messaging services (either email or text) from your bank to alert you to the overdraft to avoid high interest fees that may be assessed,” explains Niall Wells, CEO of online budgeting tool Planwise to Dimespring.com.
Not Asking About Product Bundling
Many credit unions will give members a break on fees and better rates for bundling products and services with their account. For example, one area every checking account member should investigate is a break given for using direct deposit, e-statements, online banking and bill pay. All of these services are generally free for the member and can often pave the way for lower fees and sometimes rate hikes on deposit products. Additionally, if you have a loan at the same credit union, you may also be eligible for discounts and fee waivers.
For example, Service Credit Union ($2 billion, Portsmouth, NH) offers loan discounts, free checking and early payday checking when the checking account holder signs up for direct deposit.
Using Foreign Bank ATMS
Unless you like being nickeled and dimed, it’s best to stick to ATMs within your credit union’s network. Using a foreign ATM (meaning one that is not in your network) could mean big fees every time you use it. Inquire about point-of-sale cash withdrawals at local retailers if your credit union doesn't offer an ATM on every corner. Often, cash back during a point of sale transaction is fee free (however many have lower limits).
The Detroit News financial columnist Brian J. O’Connor wrote about the trouble with banks, handing out 2012’s “Funny Money Piggy Banker Awards” (otherwise known as “The Piggies”). “Customers who get hit with fees for using an ATM other than their own bank's get hit with a new record, too, a combined $4.07 per transaction in charges from BOTH banks,” he blogged last month.
Credit union members can usually go through point-of-sale or obtain money free of charge throughout the shared branch network (at other credit unions).
Not Inquiring About a Credit Union Checking Account
Ready to stuff the mattress with cash because you are tired of paying monthly checking account maintenance fees? Don't start stuffing just yet, most credit unions offer free checking with no strings attached. While banks are shelving their free account programs due to regulations, most credit unions continue to provide a solid checking account at no charge.
O’Connor says that a credit union is typically your best bet. “You can still find free checking (try a credit union), but even if you do end up paying the average of $5.48 monthly checking account service fee, that $66 a year still is cheaper than being walloped with just two bogus bounced-check charges, which now are typically $35 each.”