How To Cut Banking Costs
Saving Money: If you're using a bank account to save money, are you paying a monthly fee? If you have a no-fee account, it may still be costing you money if you're required to keep a minimum balance of any significance in order to avoid monthly fees. That balance, invested in a CD or interest-bearing account, could be making you money. If it isn't, you may want to consider your alternatives, or at least be aware of the costs so you can make intelligent trade-offs between costs and the services that are important to you. The best bet might be a bank that offers free checking if you have a savings account with a minimum balance. By keeping only as much money as you need to pay immediate bills in your checking account, more of your money is working for you by earning interest.
Get information from several banks and choose the one that best fits your habits. If you always dip below the minimum balance, it does no good to have "free" checking, since you will incur a fee if your balance goes below the minimum.
If you usually keep a significant balance in an interest bearing bank account, it's to your advantage to keep it in a bank that uses the average daily balance method for calculating your minimum balance and interest. You're much less likely to be charged a fee if you dip below the minimum balance during the month (as long as your average daily balance for the entire month is not below the minimum), and you earn interest on all your money. Some other methods of calculating interest can cost you hundreds of dollars a year in interest that would have been credited to your account under the average daily balance method.
Borrowing Money: The differences in banking costs are fairly obvious when you're borrowing money. Obviously, a lower interest rate will save you money, right? Not necessarily. Fees, points, closing costs, and other factors can end up costing you more even if the rate is lower. See "Choosing the Best Mortgage For You" for an example of the types of issues to consider when borrowing (whether for a mortgage, car loan, or other type of loan).
Check Printing: Why pay $25 or more for check printing when you can use a discounter like Current (1-800-533-3973) or Checks in the Mail (1-800-733-4443) for a fraction of the cost? Discounters charge around $5.00 for 200 checks, as opposed to the $25 your bank charges.
ATM Fees: Use only Automated Teller Machines (ATMs) that don't charge a fee. If you withdraw $20 from an ATM and are charged $1.50 for the transaction, you have in effect paid a 7 1/2 % surcharge for the use of your own money.
Overdraft Fees: Balance your checkbook every month and do not bounce checks. Typical fees for a check written against insufficient funds range from $20 to $25. If more checks clear before you are aware of the problem, you can easily bounce 2 or 3 additional checks for a total cost of up to $100.
Online Banking: There are two ways to do online banking. With internet-based banking, you can dial in to the bank's computer using any computer with a modem, and use the bank's software. Client-based systems require you to download information from the bank into personal finance software that resides on your computer's hard drive. Internet banking is the way of the future, so if you're just getting into online banking, you might save yourself time and trouble by choosing a bank with internet-based banking.
While some online banks don't charge fees, you can generally expect to pay $4.00 to $6.50 per month for basic electronic banking services, plus an additional $4.00 to $6.00 for online bill payment if you choose that option. Shopping around can pay off, though. Check out NetBank, whose rates and fees are hard to beat.
Remember, it's easier to save money than it is to make it, and small amounts here and there can add up to big savings. Why pay more than you have to for banking services?
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