If you have a bank account, there is a good chance you've paid an unnecessary fee at least once, whether it was a check you wrote but forgot about, or not keeping enough money as a buffer. But, with a little planning, you can avoid those fees and keep your cash where it belongs - in your wallet. IN PICTURES: Top 5 Reasons Why People Go Bankrupt
- Bouncing Checks
Haven't we all considered keeping our money in high-interest savings accounts, and just transferring it as required in order to maximize our returns? The problem always comes down to timing, either remembering to transfer the money or having to co-ordinate between the banks' schedules.
Think of it this way: To cover a single $30 NSF fee you would need to put $1,000 into a high-interest savings account earning about 1.5% for a total of two years, so you might as well avoid that $30 charge and leave that $1,000 buffer alone.
Solution: Write a note reminding yourself about each check outstanding, and keep a healthy buffer in your bank account.
- Overdraft Charges
Unless it's an emergency, not being able to remember if you have enough money left in your bank account is no excuse for allowing yourself to be charged with an overdraft fee.
Solution: Use cash instead of your card, or start tracking your expenses so you know what is left. Alternatively, using a credit card like a debit card by clearing each amount you've charged is a good way to keep your credit balance in the clear, and it won't trigger your overdraft. (Learn more about overdrafts in When Good People Write Bad Checks.)
- Cash Advance Fees
If you use your credit card to withdraw cash from any ATM, you're charged with a banking fee, your credit card's cash advance fee and, to top it off, you still have to pay back the actual amount you took out, with the full interest rate being applied from the day you withdrew the money.
Solution: Use a debit card or carry enough cash on you to resist the temptation of using your credit card as if it were a debit card.
- Foreign ATM Charges
Unless it is a true emergency, paying extra money in fees just for the convenience of not having to search for your bank's ATM is a waste of money. Even if it's only a couple of bucks here and there, it all adds up at the end of the month.
Solution: Make it a point to visit your bank branch on a regular basis to take out what you need and are allowed to spend until your next visit. If you run out of money early, make it a point to take out more the next time until you know how much you need to get through each week, and take a second look at your budget to avoid overspending.
- Payday Loan Penalties
Using payday centers can be a difficult cycle to break, once you've started. Most payday loan centers take 20% of your paycheck as a processing fee, and if you cash your entire paycheck, you may be left with a huge chunk missing from your budget.
Solution: Go cold turkey. If the situation is dire (as in, you don't have any food for money until your next paycheck), then on your last paycheck cashing excursion, squeeze your budget to take out that payday fee and vow to never go back again. (For more information on payday loans, see Payday Loans Don't Pay.)
- Bank Administration Fees
There are lots of little charges your bank will tack on for what might seem like the most mundane of services:
- Not keeping a minimum balance on your bank account
- Exceeding a number of total transactions per month (debits, withdrawals)
- Exceeding the number of allowed debit transactions per week
- Exceeding the allowable amount of withdrawals each week
- Withdrawing money outside of your country
- Receiving paper statements instead of e-statements
Solution: Read the fine print and ask for a list of all the bank fees associated with your bank and your account type. Once you are aware of what you can be charged, you'll be more likely to avoid those fees. Alternatively you can shop around and try to find the best bank to fit your lifestyle.
The Bottom Line
That slow trickle of money out of your pocket going towards easily avoidable fees can add up to a surprising amount of money that could be used towards something else. (For related reading, take a look at our tutorial on Managing Your Checking Account.)
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