You think of your checking account as a tool for managing money. Once or twice a month, your paycheck gets direct-deposited into your account. Then the withdrawals begin: cash at the ATM, electronic bill pay, occasional written checks.
If you think of it much at all, you may consider your checking account a neutral channel for making the rest of your life work: rent and mortgage, utilities, grocery shopping.
But what happens when your checking account, instead of just being a vehicle for deposits and withdrawals, costs you money? Consider the common mistakes that can turn your checking account into a cash sink.
1. Using other banks' ATMs
Bad geography can cost you a fortune in ATM fees. Say your house is near your bank of choice--but it's hard to resist that ATM around the corner from your office. Or you moved, and an ATM that was once convenient to visit on Friday afternoons is now on the other side of town. Fees from the "strange" ATM you use as well as charges from your own bank for using that ATM can add up, fast.
If your current bank isn't meeting your needs, don't be sentimental. Changing to a new bank is easy: Compare checking accounts, choose a local bank with the most convenient ATMs, or consider an online bank that waives ATM fees.
2. Accepting new fees without question
A few years ago, free checking was the norm, usually just requiring a monthly direct deposit. These days, you may find that your bank is adding fees to your checking account, including perhaps a fee just for having an account to begin with.
As noted above, you shouldn't be sentimental if your bank is adding fees that nibble on your balance each month. Many online banks have perks that rival and outmatch brick-and-mortar banks, including high yield checking accounts. Choose the best account for your needs.
3. Neglecting to sign up for alerts
Your bank should make it easy for you to keep track of your account information. These days, alerts delivered to your e-mail account or smart phone can let you know the headline news from your bank account. You can sign up for good news, such as new direct deposits or specific cleared checks.
But it's the "bad news" you need to pay attention to:
- Insufficient funds
- Transfer limits
- Unusually large withdrawals
Knowing about potential problems with your account means you can address them that much faster.
4. Forgetting to track your spending
You may be in the habit of writing your grocery bill totals in your check register, but do you always remember the $6 sandwich? Record those debit card charges--all of them. Smaller charges add up, and if your checking account sinks close to zero between pay periods, you could be facing problems if you overdraw.
Because of the Credit CARD Act of 2009, your bank must get your opt-in for overdraft services--either to front you the money when you're going to overdraw or to transfer the money from a linked savings account. Both options will cost you fees, and those dollars add up. Learn to protect yourself from overdraft fees. If you don't opt for the protection, you could find yourself out of a payment option at the cash register.
5. Putting off a bill pay plan
Does this scenario sound familiar: You sign up for electronic billing from your cable company, and you dutifully pay the first couple of bills when the email comes in. But eventually life, and an overstuffed e-mail inbox, intervene, and the email notice disappears before you remember to pay it. The next thing you know, your $100 cable bill is a $210 bill--worded a little more sternly--and the money is hard to come by.
When you transition to electronic bill pay, develop a plan to make sure you don't forget to respond to those emails. A few options:
- Pay bills immediately, as they come in.
- Use a flag system in your email
- Create a set day or couple of days each month where you pay all outstanding bills.
- If your bank offers it, have your bank automatically pay the bill (up to a set amount).
Use these strategies to ensure that your checking account remains a tool to manage your money and not a drain on your cash.