13 Banking Errors That Might Be Destroying Your Accounts

Embracing modern banking practices offers unparalleled convenience and security. Yet, this convenience often comes at a cost. Despite the availability of no-fee checking and savings accounts, banks typically find ways to generate revenue from their customers. While it’s reasonable to expect some fees for banking services, it’s essential to avoid unnecessary expenses.

Regrettably, many individuals inadvertently incur higher costs than necessary through various banking mistakes. Whether it’s overlooking opportunities to save, neglecting to switch to more advantageous options, or simply paying excessive fees, these missteps can add up to significant financial losses annually. Here are 12 common banking mistakes to watch out for. If any of these resonate with you, consider implementing our suggestions to retain more of your hard-earned money.

Many checking accounts still come with monthly fees, and while some savings accounts may have lower fees, they’re still present. However, the landscape is changing, with more financial institutions offering no-fee accounts, a perk you shouldn’t overlook. Why pay $10 or $20 monthly just to maintain a bank account when you could avoid these charges altogether?

Some fee-based accounts may waive the fee if you meet specific criteria, like maintaining a minimum balance or setting up direct deposit of your paycheck. Yet, if you opt for a no-fee account, be sure to scrutinize the terms. These accounts may have a fee structure for certain transactions, potentially costing you more than a standard monthly fee in the long run. Always read the fine print.

If you’re able to maintain a healthy balance in either your checking or savings account, that’s commendable. It suggests you’re among the fortunate Americans not living paycheck-to-paycheck. However, if those balances are just sitting there idly rather than accruing interest, you’re missing out on potential benefits.

Checking accounts typically offer shockingly low interest rates, if any at all. The average return on a $1,000 balance in a checking account is a mere 60 cents. Instead, consider keeping your extra funds in a high-yield savings account. With interest rates currently on the rise, your savings will accumulate faster than before. Alternatively, you could invest your money in a relatively safe ETF or mutual fund for potentially higher returns. Keep in mind that this option involves additional steps and may not provide immediate access to your savings in case of an emergency.

When it comes to high-yield savings accounts, beware of chasing rates. Many banks advertise enticing introductory rates to attract new customers, but these rates are often variable and subject to change. Constantly transferring your money from bank to bank in pursuit of a slightly higher interest rate may not be worth the effort.

Even with high interest rates hovering around 1 to 2%, fees such as account opening or closing fees can significantly diminish any extra gains from the higher rate. Instead of focusing solely on interest rates, prioritize finding a bank and a savings account that align with your financial needs. As long as the fees are minimal and you consistently contribute to your savings, your money will continue to grow steadily without unnecessary hassle.

Overdraft and ATM fees can easily be avoided with some basic planning. However, banks rake in millions of dollars annually from these charges. Overdraft fees occur when your account lacks sufficient funds to cover a debit or other pre-authorized purchase. Typically, your bank will permit the transaction, plunging your account into the negative and levying a substantial fee — often ranging from $25 to $50.

ATM fees can also accumulate swiftly. Many accounts have a limited number of permitted ATM transactions per month, and nearly all bank accounts impose fees for using out-of-network ATMs.

The upside is that you can usually opt out of overdraft protection. If your account is short on funds, your purchase will be declined without incurring additional charges. While this might be a tad inconvenient, it saves you money. Regarding ATM fees, you can either plan ahead for cash needs or seek out a bank and account type that doesn’t penalize you for multiple ATM withdrawals.

Moving beyond standard bank accounts, financial institutions offer various types of loans, including car loans, small business loans, home equity lines of credit, mortgages, personal loans, and credit cards. Each of these products comes with a detailed set of terms, encompassing interest rates and potential fees.

It’s crucial to recognize that many of these terms are negotiable. For instance, if your bank offers you a mortgage at 3.9% while a competing broker proposes 2.9%, don’t hesitate to negotiate. Engage in discussions to leverage one offer against the other, prompting the banks to vie for your business.

This negotiation tactic applies across all credit products. Seek out the most favorable terms for an auto loan by comparing offers. Consider threatening to close a credit card account unless the bank matches the interest rate of a secondary card. Banks are eager for your patronage, but you still hold sway over the terms.

Many banks provide rewards, reduced fees, or discounts, but you need to stay vigilant. Perhaps your credit card offers additional cash back when used at specific gas stations or grocery stores. Consolidating multiple accounts with the same bank could lower your service fees compared to having accounts spread across different institutions. Additionally, opening an account may qualify you for a cash sign-up bonus, provided you meet all the conditions.

Monitoring the perks and rewards programs offered by your bank is worthwhile. By staying informed, you can potentially benefit financially with minimal additional effort.

Many people stick with the same bank they’ve been with since their teenage years, often because it’s what they’re familiar with. However, banks frequently reserve their top rates, deals, and promotions for new customers. By not exploring what other banks offer, you might be overlooking potential savings. It’s not just about shopping around for loans, mortgages, and credit cards; consider the benefits of switching your standard checking and savings accounts as well. You could discover lower fees, improved interest rates, additional services, and even sign-up bonuses.

The emergence of the fintech industry has injected fresh energy into banking. Many new companies offer online-only banking solutions, operating solely through websites and smartphone apps. Unlike traditional banks, they lack physical branches, phone lines, or ATMs. However, they still offer essential banking services, such as direct deposit and online bill payment. Their streamlined operations translate to significantly lower fees for customers. Unless you require complex banking services, exploring these digital banking newcomers can be worthwhile. Moreover, they often partner with federally certified banking institutions, ensuring the safety of your funds.

Having a surplus in your checking account isn’t necessarily a bad thing. It offers quick access to cash for unexpected expenses or ATM withdrawals. However, idle funds in your checking account don’t work to your advantage. They don’t accrue interest or generate returns from investments. Despite this, many individuals maintain sizable balances in their checking accounts.

It’s prudent to maintain a buffer in your checking account to cover automatic payments and potential bank fees, with a bit extra for unforeseen circumstances. However, beyond that, consider transferring excess funds to a high-yield savings or investment account. These alternatives provide safety and accessibility while allowing your money to grow over time.

Do you meticulously review every transaction in your bank statement? Chances are, you might overlook some details — but it’s crucial to scrutinize them. Amidst the usual deposits, bill payments, and routine purchases, there could be hidden charges or recurring bills you’ve forgotten about. These discrepancies might go unnoticed unless you actively examine your statements.

If you spot an unfamiliar charge, don’t hesitate to contact your bank for clarification. It could be an error or potential fraud. This advice becomes even more pertinent if you share a joint account with a partner. Regular communication about expected charges is essential to avoid surprises. You don’t need to scrutinize every single detail obsessively, but ignoring your bank statement entirely is ill-advised.

Automating regular monthly bills that remain consistent can be a game-changer. Not only does it save you valuable time, but it also mitigates the risk of forgetting payments. Forgetting could lead to late fees and potentially damage your credit score.

If you’re still relying on paper checks for bill payments, it’s time to transition to online payments. They’re instantaneous, eliminating the possibility of delays caused by postal services. If you’re already utilizing online payments, consider automating them for added convenience. Just ensure that your account maintains sufficient funds to cover these automatic payments when they come due.

This article explores banking mistakes that could potentially impact your finances. However, it also suggests an alternative to traditional banks: credit unions. Unlike banks, credit unions operate as non-profit organizations, leveraging the collective financial strength of their members to manage accounts, provide loans, and generate revenue through investments. Additionally, credit unions typically offer lower eligibility requirements, reduced interest rates, and the same federal deposit insurance as conventional banks.

While credit unions offer numerous advantages, there are some drawbacks to consider. They often have fewer physical branch locations compared to banks, although this may be inconsequential if you primarily conduct banking online. Additionally, credit unions may not offer the same extensive range of banking products, but they still fulfill most basic financial needs such as checking and savings accounts, loans, and mortgages.

This isn’t so much a banking error as it is a lapse in online security. However, given that most individuals rely on their bank’s online services or mobile apps nowadays, it’s crucial to avoid reusing passwords from other accounts, such as email or social media, for your financial login credentials. With sensitive data at stake and the risk of fraud, it’s essential not to compromise on password security.

For online banking, always use a unique password instead of recycling the same one used for platforms like Netflix or Spotify. Additionally, consider implementing two-factor authentication (2FA) for your bank account login. This adds an extra layer of security by requiring verification codes sent to your cellphone or email, ensuring that only authorized users access your financial information.