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10 Practical Tips To Lower Your Banking Costs

10 Practical Tips To Lower Your Banking Costs

Recently, I was going over the details of my budget with a friend. When I got to the estimated expenses, he seemed to have a puzzled look on his face and asked me if I had forgotten to include banking costs. I was surprised by this question, but not as surprised as he was by my answer: “I don’t really have any banking expenses.”

“What about service charges, accidental overdrafts, minimum account balances etc.?” he asked. I shrugged. I don’t pay my bank to hold my money, they pay me for the privilege. Here’s how:

1. Set up overdraft protection … now!

Accidents happen. No one usually intends to overdraw their bank account, but sometimes a debit transaction comes through before a check clears and there you are with one or several charges applied to your already hurting bank account.

The first thing you should do after setting up a bank account is inquire about available overdraft protection. Sometimes referred to as cash reserve checking, this is a line of credit that the bank extends to its customers that kicks in when your debits exceed the balance in your account. Basically, you are pre-approved for a loan that is used to cover your negative balance.

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While this protection virtually eliminates overdraft fees, there are two small caveats. Firstly, you must be approved for such a line of credit, which is dependent on several factors including your credit score and history with the bank. Secondly, banks are not in the business of loaning out money for free, you will be charged interest on the overdrawn amount, though this is almost always going to be less than the fees that would be applied without overdraft protection.

2. Establish a good relationship with the tellers at your bank.

We often tend to view banks as large, faceless megacorporations, and save for the local credit unions, most of them are. That said, the people who work at your local branch are just that, people, and they often possess more power to help you out than you may realize. Knowing your teller by name, asking them about their family and what they are doing this weekend are, other than being generally polite things to do, great ways to ensure that you are treated fairly by your bank. I cannot tell you how many times my teller has pushed a deposit through to clear immediately or removed a fee for me: services that I doubt would have ever been extended to someone they didn’t know.

3. Prepare ahead for traveling abroad.

Oftentimes travelers run into additional banking fees and inconveniences, simply because they didn’t plan ahead. Be sure to tell your bank that you are traveling. Will you need to use ATMs while you are abroad? Check to see if your bank has any arrangements with banks in the countries to which you are traveling. If they do, using these banks can significantly cut down on fees and you can be assured that your money will be readily available when away from home. If you travel frequently, consider opening a Schwab Bank High Yield Investor Checking Account, which automatically reimburses all foreign ATM fees.

4. Use online banking but don’t rely on it.

Online banking is a godsend for most people. It allows you to keep an eye on your balance, transfer money from one account to another, and more. Many banks allow you configure alerts so that you are notified via email or text message when your balance drops below a certain threshold. Get to know what your online banking offers and leverage these tools to stay in control of your account. While this can be an extremely useful tool, bear in mind that it does not replace the need to balance your checkbook.

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5. Balance your check book.

Every time you swipe your debit card or write out a check, add the transaction to your ledger immediately. For all intents and purposes, view that money as no longer being in your account. If you get into this habit and quit relying on the available balance reported by your online banking, you will save yourself a lot of trouble, fees and embarrassment.

Remember that transactions can often take days to show up on your online ledger. Always know what it really in your account. Maintaining a balanced check book will also enable you to more easily spot potential bank errors, such as double charges. While there are a wide variety of apps available to make this age-old act easier, I personally prefer Toshl, which is available on all the major mobile platforms and can also be used to set up budgets and generate helpful graphs about your spending habits.

6. Shop around for better accounts.

Before looking elsewhere, go into your bank and ask to talk to someone about your account. Let them know that you are concerned about avoiding fees and would like to know what types of accounts are available. Answer any questions they ask you with complete honesty. Do not say that you can maintain a higher minimum balance than you realistically can. Oftentimes, you can forgo interest (which is often quite meager to begin with) for a totally free account with no restrictions. After a simple five-minute conversation with my banker, I was switched into an account that is typically just for college students (which I am not) that offered some built-in overdraft forgiveness with no fees and no minimum balance. While your mileage may vary, it never hurts to see what is available. If it seems that your bank has nothing to offer, look elsewhere.

7. Be careful when writing checks.

Checks can be tricky as you never know when their recipient will cash them and if there isn’t enough money in our account when they do, they will bounce, which is costly and very embarrassing. Bounce enough checks around town and you might even find yourself in jail. If we are following tip #5 and balancing our check book, this should never happen. That said, sometimes we make mistakes. So, if you do bounce a check, and you happen to catch it right away (it shows up in your online banking, but the transaction is still “pending”), then immediately deposit enough funds in your account to cover the check and call your bank. There is a chance that they might be willing to manually approve the transaction and prevent the check from bouncing.

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8. Read every notice that your bank mails you.

Regulations require that your bank notify you of any new fees. Be sure to open and read every piece of mail that your bank sends you. If they are introducing a new fee of some type, contact them immediately and see what can be done to avoid being charged. Often they are just hoping that you won’t notice. Stay on top of things and you could avoid increasing fees.

9. Consider switching to a credit union.

If you are unable to get your banking costs under control with a typical bank, try a credit union. Credit unions are member owned and operated and as such, are service-driven as opposed to profit-driven organizations, and because of this they tend to offer more favorable rates and additional services.

10. Don’t be afraid to mix and match your banks.

If one bank offers a great free checking account and another has really useful features for its business accounts, don’t be afraid to mix and match. Find the accounts that suit your needs, regardless of where they are offered.

 

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With a little effort, it is possible to mitigate most banking costs, even those associated with mistakes made on your own part. For a look into some more money mistakes worth avoiding, check out 11 Money Mistakes You Don’t Realize You’re Making.

Featured photo credit: Money Bills Calculator Save Savings Taxes/jarmoluk via pixabay.com

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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