Most Common Mistakes People Make With Their Finances
Do you find yourself out of money to spend despite working hard and being mindful of expenses? If so, you might be making some common banking mistakes. Even one small mistake can have major consequences on your finances.
Learn the most common banking mistakes that could be ruining your finances.
10 Banking Mistakes You Should Be Aware Of
If you're not careful, it's easy to make mistakes with your finances. From paying fees you didn't know to not following a budget, these seemingly tiny errors can have a huge impact in the end.
Here are ten banking mistakes that could be ruining your finances:
1. Paying hefty monthly service charges
Although rare, some checking and savings accounts nowadays don't have a monthly fee. If you're being charged $15 to $30 per month just for having an account open, maybe it's time to look for options. There are plenty of financial institutions that won't charge you anything.
Banks sometimes waive the monthly fee on a paid account. If you agree to maintain a minimum balance or have your paycheck deposited directly into that account. If you decide to go with a no-fee bank, just read all the details before signing up.
Sometimes these accounts include additional charges for basic banking tasks. These banks could end up charging more than what you would pay in fees with another bank.
2. Maintaining funds in low-interest accounts
There are several reasons why you should avoid low-yield bank accounts. First and foremost, these types of accounts don't offer the same return on investment as other options. With a low-yield bank account, your money isn't working as hard as it could be. And in today's day and age, every penny counts.
In addition, many low-yield bank accounts come with hidden fees that can eat your earnings. Some banks may charge a monthly maintenance fee just for having an account with them. Others may charge transaction fees whenever you withdraw or transfer funds to another account.
Before opening a new bank account, make it a habit to read the fine print so that you will be fully aware of all fees that could apply.
All things considered, it’s generally not a good idea to keep your money in a low-yield bank account. You’ll earn less interest, you could be charged fees, and you may even lose money if you need to withdraw cash for an emergency.
3. Not using online banking
You've probably seen the ads for online banking or have friends who use it. But you may still be asking yourself, why use online banking? Is it really safe? What are the benefits?
The fintech industry has given traditional banking a run for its money with the advent of online-only platforms. With cutting-edge website design and user-friendly smartphone applications, these new companies are winning customers over by offering increased accessibility and convenience.
However, their lack of brick-and-mortar locations or customer service telephone lines can be daunting for those who prefer more personal interaction or require cash access to ATMs.
4. Not maximizing bank perks and rewards
It's easy to overlook bank rewards when you're focused on earning interest, but if you're not taking advantage of them, you're missing out!
Discounts, points, and other benefits await you if you're clever enough to find and take advantage of them. Some credit card companies offer extra cash back if used at a partner store or gas station. Also, you can lower your service fees when having multiple accounts in a single bank.
In some cases, simply opening an account can make you eligible for a sign-up bonus as long as you meet the requirements set by the company.
Monitoring perks and rewards programs your bank offers get you financial benefits without much more work.
5. Using the same password for different accounts
While this isn't a mistake unique to banking, it's still important to avoid. Poor online security habits can compromise your finances. Many people use their banks' online web service or smartphone app, but they make the mistake of using the same password for everything.
This is dangerous because if someone gets ahold of your password, they could access all sorts of sensitive data. To protect yourself, take the time to create different passwords for each account.
For an extra layer of security, consider adding two-factor authentication (2FA) to your bank account login. This will require frequent codes sent through text or email so that your financial information is exclusive to you.
6. Not Paying Bills Online
In today's day and age, there are a million and one things to keep track of. From work to family to your social life, it's easy to let things fall through the cracks. The last thing you don't want to forget is paying your bills. Unfortunately, with so much going on, it's too easy to miss a payment here and there.
That's where online bill pay comes in. By paying your bills online, you can set up automatic payments. You never have to worry about forgetting to pay a bill again. Plus, you can often get discounts for setting up automatic payments or paying your bills early.
And if you're worried about security, don't be—today's online bill pay systems are just as secure, if not more so than traditional paper-based methods.
7. Keeping large amount in your checking account
The majority believe that it's smart to keep a large sum of money in their checking account so they always have access to it. However, this isn't always the best idea. That money could be put into a savings account or invested so that it can start working for you and growing.
Let's face it, having a large chunk of cash sitting in your checking account can also be tempting. Also, you might get tempted to dip into that fund for non-essential purchases. Before you know it, your hard-earned savings are gone, and you're back to square one.
8. Paying withdrawal and overdraft fees.
Did you know that the average American household pays $329 in bank fees annually? A large portion of those fees are due to overdrafts and withdrawals.
There are different ways to avoid overdraft fees. By signing up for text and email alerts from your bank, you can transfer funds into your account even before you are charged a fee. Also, many banks offer overdraft protection programs for a small monthly fee.
These programs help customers avoid being charged overdraft fees by automatically transferring funds from a savings account or line of credit when needed.
Similar to avoiding overdraft fees, there are a few different ways that you can avoid withdrawal fees. One way is by simply checking with your credit union or bank to see if they charge these fees and how much they are. Another way is to maintain a minimum balance in your account.
9. Sticking to a single bank
You've probably heard the saying, "Don't put all your eggs in one basket." When it comes to your finances, this is sage advice. Having multiple bank accounts offers plenty of benefits that help you manage your money more effectively.
New bank customers usually get the best offers. So if you’re keeping your eye on a single bank, you're probably missing out on some savings. It's not only wise to compare multiple banks for loans and credit cards but also deposit and saving accounts too.
You might end up with fewer fees, higher interest rates, more services, or even a sign-up bonus!
10. Not keeping tabs on your bank transactions
It may not seem like there’s a need to keep close tabs on your bank transaction history. After all, banks are generally reliable in keeping track of your money. However, there are a few good reasons why you should get into the habit of checking your bank transaction history regularly.
Here are reasons why you should make it a habit to check your bank statement:
- To catch fraudulent charges early;
- identify incorrect charging or billing errors;
- monitor your spending patterns;
- track progress on debt repayment/savings goals; and
- ensure automatic payments are processed correctly.
Avoid These Banking Mistakes at All Costs
Making mistakes with your bank can be costly—literally! You can save yourself time, money, and headache down the road by avoiding these common banking mistakes. So, take some time to review your banking habits today and be well on your way to financial success!