Upon graduation from high school everyone begins to manage their own money whether they go to college or begin working full time. Even the most responsible person can be tripped up by banking practices they don’t know about.
ATM Fees If you’re new to using a debit card or credit card at an ATM to get cash for the weekend, you may not know that there are fees, usually flat rate, for each transaction. When you use an ATM from a bank other than your own, you are liable for transaction fees at the host bank and your own, too.
The Fix Take out all of your spending money for the month at one time. You’ll be better able to manage the amount you spend and reduce fees.
Overdraft Fees Even a careful person can overestimate or not remember the amount of money in a checking account. If you make a withdrawal at the ATM or an online payment that is more than the amount in the account and you will be hit with overdraft fees that start at around $35.
The Fix Keep a base amount in your account that you don’t spend-ever; Keep this amount over any minimum deposit your bank requires. It could be $50 or $100 but should be enough to cover a typical week’s worth of small expenditures.
Holding onto Deposits When you put $$ into your account, you may find that the cash isn’t available for up to 2 business days. If your pay check is deposited on Friday it could be Monday or Tuesday before you can spend the money to pay bills or buy pizza. When the bank is holding your deposit and you make a purchase, those funds could be considered an overdraft if the account is low.
The Fix Arrange to have money from parents deposited a week before you need to make tuition, rent or other predictable payments so that the funds clear before you must disperse them. If you are working, create a saving account with a month’s worth of fixed expenses like rent, utilities, car payment, and arrange for overdrafts to be covered from the saving account to avoid overdraft fees. There may be a transfer fee that will be lower than an overdraft fee.
Processing Large Transactions First Say you have $600 in your checking account and you buy books for $50. Later you write a check for a fund raiser for $25. Then you write another $25 check to repay a loan from a friend. Your car payment of $550 is due. Instead of paying the checks in the order in which they were written, your bank processes the car payment and bounces 3 checks for which you must pay 3 overdraft fees instead of 1.
The Fix See the previous suggestions.
Hidden and Unexpected Fees Did the bank warn you that you may be charged if you don’t maintain a specified sum in your account, for stopping payment on a check, or looking at your balance at another bank? Some banks now also charge for “excessive” human help, defined as using a teller more than 2x a month, or just for the privilege of accessing human help. Another tricky charge is a fee for closing your account. Before you decide where to open yours, see if there are fees for ending the relationship, especially if you won’t be using the account for at least a year.
The Fix It pays to ask before you choose a bank. Some branch managers will dazzle you with services they offer or “lower” fees. Shop and compare before you give them your money. If you will be living in the same area for an extended time, check out products you may want later like a car loan or home mortgage. When you establish a relationship with a bank, you should also position yourself for favored treatment as customer of multiple services.
Consider a credit union instead of a bank. You may be able to use one based on a family member’s eligibility. You will find services are cheaper although credit unions don’t always have the full range of services.
Financial literacy is understanding how money works in your life, how to use it most advantageously and how to keep more of it. What’s your situation….would you like to fill in the gaps in your financial knowledge? firstname.lastname@example.org or 610-212-6679