Your Five Minute Guide to Banking

More than 40% of a bank’s revenue comes from fees. Taking advantage of the services a bank offers while avoiding the fees is a win-win for the consumer.

Opening an Account

The checking account is still the most basic bank service available. There are free accounts with no minimum balance, NOW accounts that pay interest by maintaining a minimum balance and money-market accounts that offer higher interest, but require a larger balance and limit the number of checks you can write. Ask for detailed information about each, including all monthly fees and penalties before deciding which is best.

Once you’ve opened your account, avoid overdrafts. The fee for non-sufficient fund (NSF) checks has risen to an average of $30 and usually the largest check is honored first, leaving less money to cover smaller checks. As a result, you could end up paying an NSF fee for every smaller check you’ve written, as well as the fee charged by each business that was shorted! Also, be aware that certain deposits, such as deposits made at a remote ATM, may take up to 10 business days to become available.

Many institutions offer a Bounced-check Protection Service, which covers you up to a certain amount. But until you pay what is owed, you’ll end up paying the bank’s NSF fee PLUS daily fees until you’ve made amends. Another option is Standard Overdraft Protection where the bank will draw on your savings account, credit card, or line of credit for a small fee to cover bad checks.

Debit or Credit

You’ll receive a debit card with your new account allowing you to access cash at ATMs or to make purchases. However, if you use your card at an ATM owned by another bank, you’ll pay a fee as high as $3, and your bank will also charge a fee. Being charged $6 to withdraw $20 doesn’t make sense. Avoid this trap.

Many institutions also charge a fee when you make a purchase with your debit card. When the cashier asks “Debit or credit?” choose the credit option and avoid the fee. Additionally, if you use your debit card at a gas station that does not require a PIN, your bank will regularly “block out” an amount greater than your actual purchase for up to 72 hours. Be aware of this practice to avoid overdrawing your account.

Savings

Banks offer basic, low-interest savings accounts and higher-interest money-market accounts. Money-market funds, available through mutual fund companies, generally pay a higher yield and don’t have an early-withdrawal provision. Certificates of deposit (CD) mature and pay interest in 30 days, although the longer the term, the higher the interest rate. A penalty is charged for early withdrawal, so make sure you won’t need the money. And again, shop around for the best deals.

Convenience

Today, you can have your paycheck direct deposited, use online banking to review your records, or choose automatic payment for bills that don’t vary from month to month such as a mortgage or car loan. In the end, it only makes sense to take advantage of your bank’s service offerings—especially if it simplifies your banking needs.