Having a bank account is both useful and convenient. With a checking account, you can pay bills and make purchases with ease.
Also, savings accounts, certificates of deposit, and money market accounts offer secure places to hold money for both the short- and long-term, all while allowing you to earn interest on your balance.
While there are countless banking options for you to consider and use, there are also steps you can take to bank smarter. Knowing what these steps are will pay off and help ensure your money continues to work for you.
- Take Steps to Reduce Banking Fees
Banking fees can add up quickly and take a significant chunk out of your account balance. Many households that don’t use banks attribute this decision to the high banking fees that are charged.
Some of the most common fees accessed to bank accounts include:
- Third-party ATM fees
- Monthly maintenance fees
- Returned item fees
- Non-sufficient funds fees
- Overdraft fees
If you have not looked into the fees you are paying your bank; it may be a good time to do this. Once you have seen what you are being charged for, you can take steps to avoid some of them.
One way to do this is by setting up low balance alerts. This will let you know when to deposit into your checking account to avoid monthly maintenance fees or overdraft fees.
You can also consider changing banks to one that doesn’t have as many fees, such as infinite banking.
- Re-Evaluate Your Current Bank
On average, an adult in the U.S. has had the same primary checking count for about 16 years. A lot changes in that amount of time.
New players come into the industry, and there are new technological options and advances.
While this is true, just four percent of customers have switched the bank they use in the past 12 months.
It’s important to remember that the marketplace is constantly changing with new offers, innovative features and products, and more that will make your life easier and help you keep more of your money.
Because of this, it is smart to be on the lookout for something that works better for you or that is a better deal.
Take time to consider the fees you currently pay and if there is anything you can do to avoid them. If your bank requires a significant minimum balance, see if you can find a high yield checking account with lower minimums. This is going to help you avoid the larger maintenance fees.
Some banks even provide a set number of fee-free ATM withdrawals and larger ATM networks near where you work or live.
- Shop Around for a Better Deal
Even though lower interest rates aren’t great news for individuals who want to save, it’s a great thing if you need to borrow money.
If you have an auto loan, student loan, mortgage, or personal loan through your bank now, looking for a lower interest offering is smart. If you find one, it may be time to consider refinancing.
When you refinance a loan, you can replace your current loan with one that has a lower interest rate. Based on the refinancing option you choose, there could be some out-of-pocket costs to pay.
For example, if you refinance your mortgage, you may have to pay the closing costs until you can add them to the loan.
- Look at the Fine Print When Offered a Higher Rate
Be sure to read the fine print to see how long the rate you are given will last. The introductory or promotional rate may be competitive but could only last for several months or a year.
After that time period, you need to be vigilant and pay attention to what it changes to. This is especially the case if the APY (annual percent yield) after the initial period is much different.
The APY includes the impact of compounding during any 365 day period. Make sure you compare interest rates along with APYs when you shop for money market accounts and savings accounts.
If the rate is slightly lower than the APY, it likely means the bank offers a standard APY. However, most money market and savings accounts will be variable.
If you notice the opposite of this, where interest rates are higher than APY, it means you are likely dealing with a promotional rate that will be in effect for under a year.
A promotional rate can be fixed for a set amount of time, unlike the traditional APYs. However, you must select a bank that has an APY that is always competitive.
The only exception to this is if you don’t mind switching banks, which may be necessary if the APY beyond the promotional period isn’t competitive.
- Understand and Use Mobile Banking Tools
Mobile and online banking can help make the management of your accounts easier. This is going to help you reduce how often you must go to the bank in person.
If you aren’t taking complete advantage of the tools your bank offers, now is the time to do so.
One example is a mobile check deposit. This is a fast and easy way to deposit checks into your account. All you must do is take a photo of the check using your phone. You don’t have to go to the branch or the ATM.
Other mobile and online banking tools you may not be using include:
- Electronic statements
- Bill payment alerts and online bill payment
- Person-to-person payments
- Automatic transfers between your account or an account with an external bank
- Security notifications and alerts
If you have not explored mobile and online banking capabilities, you should make this a priority. It may be time to move their account for people who find out their bank does not offer many mobile or online services.
- Communicate before Closing an Account
You should never assume that your bank account is going to close automatically if the balance reaches zero.
If you want to close an account, be sure to contact your bank to find out how to do this.
It’s also a good idea to compile your automatic monthly bill payments and move them to a new account before you close the old one. This also applies if you receive a pension or Social Security. Move these to the new account before closing the old one.
Maintenance fees and overdraft charges may be incurred if you don’t let the bank know you want to close the account. A single automatic bill payment may result in an overdraft. The negative balance can cause a maintenance fee.
If you don’t pay this debt within a set period, the account can be charged off. This is going to hurt your credit and make it more difficult to open accounts in the future.
- Use Different Accounts for Each Savings Goal You Have
Establishing savings goals is something you may consider from time to time. If the goals you have involve saving for different things, establish different accounts. Doing so will help make it easier to monitor the progress you make.
An example of this would be opening a higher-yield savings account using an online account for your emergency fund. This will ensure you can access the money if you need it.
A bonus of this account is a competitive interest rate and avoiding monthly maintenance fees.
Consider a money market account for the funds for mid-term goals, like saving money for a new car or vacation. These earn interest like savings accounts and allow you to use a debit card or write a check. With this, it is simple to use the funds when you are ready.
If you have money you won’t use for a while, consider a certificate of deposit. The CD is a time deposit, which means you have agreed to keep the money in it for a certain amount of time.
The benefit is that you often earn a higher interest rate.
Now You Know the Banking Options That Will Help You Bank Smarter
When it comes to banking options, you have a lot to choose from. Be sure to keep this in mind, which will help you make the most of your money.
Being able to bank smarter isn’t as hard as it may seem. Start with the tips above.
For more helpful information, be sure to read our other blogs. We post often to help you stay informed.