5 habits that drain checking accounts

By Richard Barrington

Do you ever feel that your money seems to just slip away, as if there were a leak somewhere in your finances? If so, you may have to look no further than your checking account. Common bad habits can drain money from your checking funds in subtle ways -- unless you identify and address them.

When it comes to money, a checking account is where the action is. Most Americans use direct deposit, so every week millions of checks automatically flow into checking accounts. Then, an even greater number of transactions disburse that money via checks, electronic payments and fees. When it comes to how money flows out of your checking account, are you sure it is all going where you intend?

Here are five bad habits that can cause money to leak from your checking account:

  1. Sloppy record keeping. In some ways, checking accounts can seem to operate almost on autopilot these days. Money comes in automatically by direct deposit, and is dispersed automatically according to your electronic bill paying instructions. However, that doesn't meant that you no longer should balance your account. You need to keep an eye on whether the right amounts are going to the right places, whether any unauthorized or suspicious transactions have occurred, whether there is enough money to cover upcoming payments and whether there are new or increased fees appearing.
  2. Using overdraft protection as a backstop. An August 2012 survey by MoneyRates.com found that the median overdraft fee is nearly $30. Fees like this can quickly exceed the amount of the actual overdraft. Relying on overdraft protection is a very expensive habit. If you opt out of overdraft protection, you may find that you can not only save those high fees, but it could also force you to develop better record-keeping habits.
  3. Paying a monthly fee. Free checking isn't dead, it's just more scarce than it used to be. If you are paying a monthly maintenance fee on your checking account, it's worth shopping for a new one to see if you can do better.
  4. Using out-of-network ATMs. If you routinely use ATMs that are outside of your own bank's network, then you may be draining your checking account a dollar or two at a time. Plan your trips to the ATM more carefully so that you can use your own bank's machines. If your bank does not have convenient ATM locations, then consider changing banks. For many people, ATMs have become a far more important point of contact with the bank than a local branch, so ATM locations should be a prominent consideration when choosing a bank.
  5. Saving only "leftovers." Too many people accumulate savings based purely on what's left over after they are done spending. Try this approach instead: Have your pay deposited into a savings account rather than checking, and transfer only a set monthly allowance from savings to checking to cover your spending needs. This way, saving comes first. You may find this forces you to stick to a better-defined monthly budget.

Saving money is often about taking a number of small steps rather than any one big decision. Sometimes, it can be as simple as plugging a few leaks in your checking account.