We’ve all made a few banking blunders that left us kicking ourselves or the ATM.
Perhaps you racked up some surprise fees. Or maybe you failed to earn the top interest rate on your high-yield savings account. Even worse, you might have been duped by a scammer pretending to be your bank.
In any case, these errors are often preventable. While it can be difficult to keep up with your account details or to set up the latest alerts, taking a few preventive steps can really pay off.
“Life gets busy. You have to go to school, work, take kids to activities, cook dinner, you name it,” says Kevin Krohn, U.S. Bank’s branch banking market leader for Montana, Idaho, Utah and Wyoming. “However, making time for your finances and having a discussion about how to strategize and make the most of your dollars will go a long way toward building a healthy foundation for your financial future.”
We asked bank officials from institutions across the country to name the avoidable mistakes they most frequently see people make. Here are the top eight banking errors and how to prevent them.
1. Choosing the Wrong Bank or Account
Several of the banking miscues on this list stem from one initial mistake — you didn’t pick the right bank for you.
“Many people don’t take the time to research the right bank for their needs,” says Matt Lyon, advice director at USAA.
Before you choose a bank or open an account, think about how you’ll use it and which features are most important. You’ll also want to look into certain requirements and whether you can meet those criteria.
Here are some key factors Lyon says to think about when comparing banks and accounts:
— ATM and branch network. If you prefer in-person banking or you anticipate making frequent trips to the ATM, you may want to select a bank that has convenient locations near your home, work or school. Those who travel often may want to also consider whether the institution has a presence in multiple markets.
— Transaction flexibility. Make sure the bank makes it easy to move your money the way you prefer. For example, if you regularly transfer money via Zelle or make purchases using a debit card, confirm that the bank provides those features.
— Fees and requirements. Review the bank’s terms to understand which fees it charges and whether those can be waived. For example, some banks charge a monthly fee for holding your money, but you may be able to avoid it by maintaining a certain balance.
— Security measures. Look for a bank with robust security practices. Lyon says it should offer multifactor authentication as well as fraud monitoring and alerts. Also check that the bank’s website uses a secure encrypted connection. (Look for “https” at the beginning of the URL and a padlock icon in the address bar.)
Lyon says that before choosing a bank, you should consider which products and services you’ll want access to now and in the future.
“You may initially need a simple checking and savings account with no monthly service fees,” says Lyon. “As your life evolves, your financial needs may grow, requiring services like credit cards, auto loans, mortgages or more feature-rich accounts for daily transactions.”
2. Keeping Too Much Money in Your Checking Account
Bank officials say they see this mistake far too often. Although keeping a high balance in your checking account can provide a sense of financial comfort, it usually means your money isn’t earning the interest it could be if it were held in another type of account.
“A checking account is a great place to house money that you’re using to pay your bills,” says Krohn. “But there gets to be a point where you might be missing out on the opportunity to have your money work for you by letting your money languish in a checking account.”
But how much should you keep in your checking account? Most experts say your checking account should have enough to cover bills and a few unexpected expenses, although the balance should remain high enough so you don’t risk overdrafting your account.
Consider putting any extra funds into a higher-interest savings account. If you’re worried about your checking account running low, ask your bank whether you can link your accounts so that money in your savings account can automatically cover checking expenses if needed.
“Shifting some of that money into a high-yield savings or money market account helps your funds grow while still keeping them accessible,” says Sarah Perez, senior vice president and marketing manager at DFCU Financial.
[See: Best High-Yield Checking Accounts]
3. Paying Unnecessary Fees
Banks may charge fees for a variety of occurrences, but you can usually avoid many of them. However, customers often incur fees either because they didn’t understand their account requirements or didn’t plan ahead.
Here are three common fees and how you might be able to avoid them:
— Monthly service fees. Many banks charge monthly fees on your account, but they can often be waived if you keep your balance above a certain level or meet other requirements, such as setting up direct deposits.
— Overdraft fees. Banks may charge you an overdraft fee if you make a transaction that causes your account balance to go below zero, and this fee can be as high as $35. Avoid this fee by linking a savings account to your checking account or by setting up a mobile alert notifying you when your balance is low.
— ATM fees. If you use an ATM that isn’t in your bank or credit union’s network, you may get hit with fees from your institution and the ATM operator. “Those $3 to $5 charges add up quickly,” says Perez. “Using your financial institution’s ATM network or getting cash back at a store are easy ways to access your money without paying extra.”
4. Not Qualifying for Bonuses or the Top Rate
Customers often open accounts to take advantage of an advertised sign-up bonus or generous interest rate. This can be an effective way to pocket some extra cash, but you want to make sure you understand the requirements you must meet to qualify.
For example, you may have to maintain a minimum balance, make a certain number of monthly debit card purchases, set up direct deposit or sign up to receive online statements. In many cases you’ll need to satisfy a combination of criteria.
“Missing one step could mean you don’t qualify for that higher rate, leaving easy money on the table,” says Perez.
Krohn says another way customers often miss out on better banking deals is by spreading out accounts among multiple banks. For example, you might have a checking account at one institution, a high-yield savings account at another and credit cards with two additional banks. While this a la carte strategy can be an effective way to select the best accounts for you, it might mean you’re missing out on rewards, discounts or fee waivers that banks offer to clients who have multiple products with them.
“Depending on where you bank, it’s worth having a conversation with a banker about what products you might be able to bundle to get better rates on deposit accounts or even access to additional services,” Krohn says.
5. Not Setting Up Mobile Alerts
Most banks will allow you to receive notifications on your phone alerting you to various types of account activity. However, you typically need to opt in and choose which alerts you want. And many customers don’t do this.
You can usually receive alerts when a large transaction is made, if your balance is low, if you were charged a fee or when you have a payment due. These mobile banking alerts can allow you to take action right away to avoid fees or report fraud.
“They’re free, easy to set up, and one of the best ways to protect against both overdrafts and fraud,” says Perez.
6. Responding to a Suspicious Message
Bank impersonation scams are again on the rise, and they often start with a text message, phone call or email from someone pretending to be from your bank. These increasingly sophisticated bank scams often attempt to create panic by telling you that your account has been compromised and you must protect it by clicking a link, providing account information or following other instructions.
Bank fraud experts say it’s natural to want to address the situation immediately, and that’s the mistake customers make. Instead, if you receive a message from someone claiming to be your bank, look up your bank’s phone number separately and call it to verify whether there is actually an issue with your account.
“Be very suspicious of any messages via text or email claiming to be your bank and requesting sensitive information, directing you to click a link, suggesting you call a phone number provided in the text, or demanding urgent action,” says Darius Kingsley, head of consumer banking practices at JPMorgan Chase.
7. Neglecting Proper Security Practices
Customers often choose convenience over protection when setting up login procedures, and this can leave them vulnerable to fraud.
Kingsley recommends using complex passwords and setting up two-factor authentication for accessing your accounts. He cautions against recycling the same passwords that you have for other accounts, and he suggests using a digital password manager to store all your passwords.
“Today’s top concern is the devastation we see regularly from customers failing to protect their personal information and not taking advantage of the tools and resources available through their bank,” says Robert Dieterich, president of 1st National Bank of Scotia, a community bank in upstate New York.
8. Not Getting to Know Your Banker
As people increasingly conduct much of their banking online, many have fewer interactions with a representative at their bank. While online banking saves time, it can also prevent customers from establishing a connection with an actual banker who could be a valuable financial resource, says Dieterich. He suggests you make time for regular correspondence with a banker so that person understands your financial situation and goals and can support you.
“This relationship is important not only for fraud prevention, but also for streamlining access to financial advice and support during major life events such as marriage, purchasing a home, college, retirement or even emergencies,” says Dieterich.
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Do You Make These Preventable Banking Mistakes? originally appeared on usnews.com
