Great Savings 36 – Avoid Bank Fees Like The Plague

 

A Chase branch.At the height of the Occupy Wall Street protests there was a big push to get rid of your checking account if you used a big bank and replace it with an account at your local credit union or community bank. Besides the failure on the part of big institutions to control the pay for executives, or the need to bail them out, there was also great outrage over the fees some banks were charging their customers. As bank fees have and will continue to rise, movements like OWS are just a reminder it’s worth paying attention to the cost of the services we use. Today, we encourage everyone  to keep bank charges to an absolute minimum by taking 4 important steps:

 

Skip banks in favor of credit unions.

Credit unions and local banks often have better deals on fees and rates. They have to compete to get your business.

(1) Sign up with a credit union: In the old days, if you wanted to be a member of a Credit Union you had to be marginally related to the organization sponsoring it. Not so today. Credit unions charge less on many services and fees than banks do and can still offer you all the convenience a bank does when you need it. Credit Unions are also more likely to offer truly free checking accounts. Most banks now require minimum balances or multiple bank relationships to receive free checking. If you don’t have either, it could easily mean paying $5 or more per month.

 

I wish my bank would treat me with respect.

Are you relying on prayer to avoid overdrafts?

(2) Avoid overdrafts: According to BankRate.com the average overdraft in 2012 is running just over $31.00 per transaction. Ouch! Don’t get smacked by fees like these. One way to be certain is keep a running balance on your checking account. For 2 simple methods you can use to insure there’s always enough cash on hand to pay bills, read, “This Napkin Is My Personal Financial Planner” and “Checkbook Tricks: Keep A Tight Rein On Cash.” We should mention these methods don’t require a smart phone app or computer.

 

 

Watch out for hidden ATM fees. Check your bank statement.

Use the ATM at your bank and you can often save 2 to 3 bucks or more on “out-of-network” fees.

(3) When using ATM’s stay in network: If you use your debit card to get cash out at the local store at the corner, expect to pay about $2.50 to whomever owns the ATM, plus another $1.50 or so to your bank. To avoid all bank ATM charges the best option is not to use ATM’s at all. If you need pocket money, you’re much better off walking into the grocery store and making a minimum purchase and getting cash back. If you buy things you ordinarily need anyway the cash you get back doesn’t cost a thing. Or if you must use an ATM then stick to one you know is part of your bank’s network. That at least saves the $2.50 or so you pay out of network.

 

The tip is part of our Great Savings series.(4) Start an emergency savings plan: We’ve said it before. We’ll say it again. Having any amount of cash available for an emergency is better than having nothing. It’s simple: When you have cash in your account you are less likely to overdraw it. That’s why it’s so important to set a little something aside every time you get a paycheck. Don’t make this optional, either. Set up an automatic transfer at the bank on the day you make your deposit—one that puts a set sum in savings. A good rule of thumb is to try and save 10% of your monthly earnings. For much more information on starting a savings plan read, “How Much Should I Save Every Month.”

 

Why are bank fees going up and up? Because banks are trying to mitigate the affect of reduced revenues that have come about through increased federal regulation. Like it or not, you’re bank will figure out how to make a profit and that almost always means you end up paying more. However, you can fight back by taking the steps above.

 

 

Action Item: Figure out what your bank charges you and then stop by at your local credit union and find out how they compare. Think about it. If you save $5 a month in account fees, can chop a couple of overdraft fees off every year, and skip that twice monthly draw at the ATM on the corner you might easily save $218 a year. That’s (($5 x 12 = $60) + ($31 x 2 = $62) + (($2.50 + $1.50 = $4) x 2 x12 = $96) = $218). Multiple that by 10 for 10 years and you just saved $2,180! Now, why give your bank all that money when you can keep it yourself?

 

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