5 checking account mistakes you don’t want to make

Man sitting on ground and looking at paper work

For most people, their checking account is the heart of their personal finances. It’s where they deposit their paycheck, how they pay their monthly bills, and where they go to withdraw cash for the weekend. And, since their monthly statement details every financial move, it’s an efficient and easy way to keep track of spending and saving.

Although most checking account activity is processed electronically, it’s critical not to employ the out of sight, out of mind mentality. Check out these common checking account mistakes and how to avoid them:

1. You’re loyal to a fault

According to a survey conducted by Bankrate and MONEY, the average adult has had the same primary checking account for about 16 years. Why so long? People stay for convenience and quality customer service, which are important. But what about making sure they’re getting a good deal?

If you’ve been loyal to the same bank since you were a tween or a teen, it’s time to do a little comparison shopping. Checking accounts come in all shapes and sizes, and they’re all not created equal.

They have different features, expenses, and rates of return. In today’s competitive market, many financial institutions are wooing consumers with lower fees, more conveniences, and quality services, all of which are important to consider. Sticking with the same bank out of loyalty sounds honorable, but it doesn’t do much for your account balance.

2. You disregard the minimum balance rule

Many banks or credit unions offer no-fee checking accounts—as long as you maintain a minimum balance. Others require you to use your debit card a specific number of times per month or receive direct deposits into your account. Heck, sometimes you might even earn a tiny bit of interest. But, if you don’t comply with the requirements, BOOM! Your no-fee just jumped to high-fee and you’re out more than a few hard-earned bucks.

These checking accounts can be a smart choice for some consumers, but it’s critical that you keep track of your activity and always meet the requirements. We’re all not detail people, so if that’s too much for you to manage, move to another option. There’s nothing worse than watching your money fly out the window every single month, especially when you can avoid it.

3. You maintain a higher than necessary balance

First it’s not enough money, now it’s too much? Yep, the art of managing your money is all about striking the optimum balance.

Not all checking accounts are interest-bearing, but if they are, they traditionally offer the lowest rates. As such, you should keep enough money in your account to pay your monthly bills and cover your spending, plus a little more that can serve as a buffer. Put the rest in a higher-yielding savings account so you maximize your interest earnings.

Be sure to monitor your balance, and if you’re running low, initiate a transfer. Because most banking is done online, it’s quick and easy to move funds from your savings account to your checking account when needed.

4. You use any nearby ATM

Regardless of which banking institution you use, there are ways to avoid the notorious ATM fees. Some have large networks so an ATM is always nearby. Use your bank’s app to locate other branches or free ATMs so you don’t incur the most dreaded of all account fees. If you’re using an online bank, they’ll likely have a smaller network of ATMs, but many will offer a monthly ATM fee refund.

Using an out of network ATM should be your last resort. You’ll be charged twice—once from each bank. And, with ATM fees at a record high, it could easily cost you between $5 and $10. That’s especially painful when you’re only withdrawing a few bucks at a time.

When you’re in a pinch, you might want to be a little more creative and avoid the ATMs altogether. You can pay for your purchase with your debit card and choose the cash back option, withdraw cash less frequently, but in higher amounts, or even arrange for a friend to pay and use a money-sending app like Venmo to repay them.

5. You don’t fully understand the checking account overdraft protection plan

In 2017, Americans paid more than $34 million in overdraft fees. Today’s average overdraft fee is more than $33 per transaction, and it’s on the rise.

While an overdraft protection plan can be a benefit, it can also be a detriment. Without it, any charge or check that would cause your account balance to fall below $0 would be declined or returned. If you’re enrolled in the plan, you’re home free, right? If you’ve mistakenly swiped your debit card for more than what’s in your account, you’ll be covered and you can breathe a sigh of relief. Until, of course, you see the overdraft fee—or maybe it’s fees.

Once the first transaction crosses the $0 threshold, every transaction that follows also incurs an overdraft fee. It’s especially unfortunate when a large charge hits your account before three smaller transactions, for example. In that case, you would incur four overdraft penalties at roughly $33 each. If the three smaller transactions hit first, you would only incur one fee.

Overdraft protection will help you avoid returned check fees and maybe a little embarrassment when your card is declined, but you can rack up some hefty fees pretty quickly. If you opt for this feature, be sure to read the fine print. Some banks will offer you a grace period that allows you time to make a deposit and avoid the fees, but others may not. Be sure you thoroughly understand the overdraft plan feature before you decide whether or not to opt-in. Otherwise, it could be a costly mistake.

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