BUILD BETTER MONEY HABITS

These days, opening a checking account can be an intimidating process. For starters, there are an overwhelming number of banks, fees, and services. We’ve simplified it with these questions you can ask yourself:

• Are you required to maintain a monthly minimum balance on the account

• What happens if you go below the minimum balance requirement?

• Does the account come with a monthly maintenance fee or any other charges such as overdraft fees?

• How can you avoid having to pay any fees?

• Are there fees for using an ATM outside of the bank’s network?

• Do you have to pay for checks or debit cards?

• Is the account FDIC insured?

Putting a little bit of savings away every month can help you build your own safety net to help address life’s unexpected expenses.  To find an account that is right for you follow these steps:

1.  Do a competitive interest rate comparison. 

2.  Confirm that the savings account is FDIC insured. This should be clearly displayed on the bank’s website.

3.  Know if the account has fees.  Some accounts require you to have a minimum balance or fees to transfer funds.

4.  Make sure the account is easy to use.  For example, how simple is it to transfer money from your savings to checking account?

Every bank is required to tell you what their fees are, up-front and clearly, but it’s easy to lose them in the fine print.  Here are a few to keep your eye out for:

Overdraft Fees:  If you accept overdraft on your account, a bank will charge you a fee every time you debit your account beyond the funds you have available.  And typically it doesn’t matter if you overdraft $1 or $100, the fee is the same.  That makes even a small overdraft pretty expensive.

Non-Sufficient Funds (NSF):  Banks can charge you a fee if you write checks or debit funds beyond what is available in your account.   You can have NSF fees from the merchant too so this fee can cost you double in the long run.

Monthly or Annual Service Fees:  Most accounts have a maintenance fee for keeping your account active. 

Returned Check Fee:  If you write a check that can’t be processed and must be returned, the bank can charge you a fee.

ATM Fees:  The ATM fees you pay are usually a combination of charges for the services between the ATM and your bank account. If you're using your bank's ATM with a direct link to your account, the transaction may be inexpensive or free. But if you use another bank's ATM, you'll probably pay a fee.

Teller Fees:  Similar to ATM fees, some banks will charge you for using a teller.  This can be the case especially if you set up an e-checking account.

Minimum Balance Fees:  Some accounts require that you have a minimum balance based on the average over one month’s time.  If you dip below the required amount based on your monthly average, you could be charged a fee.

You can reduce the cost of using your checking account by taking the following steps:

Don’t spend more than you have available in your account. Overdraft fees are really expensive and bounced check penalties can be even more so. Always know what is in your account and make sure what you have available will meet the payments and withdrawals you are making.

Keep track of your account. Monitor your online account as often as you can and if you have a question, don’t be afraid to ask! Report any issues or errors immediately.  Know the terms of service for your account… understanding what fees you will be charged, when and why will help to prevent charges you weren’t expecting.

If you pay overdraft fees regularly, you are paying a lot for very short-term cash advances. Here are some steps to reduce those costs:

Track your balance. To avoid overdraft fees and not-sufficient funds (NSF) fees, you should always know what is in your account and when regular electronic transfers or bills occur. To help track your balance, consider signing up for low balance alerts and use a budget.  You can find a budget example in our Tools section.

Consider overdraft alternatives.  If you are over drafting frequently throughout the month, it might be worth checking out some alternative loans.  Sometimes loans like RISE can help you to avoid overdraft charges at a fraction of the rate. 

A fixed-rate APR or fixed APR is just that. It’s fixed and doesn’t change with the index. However, it doesn’t mean that the interest rate will never change, but the issuer generally must let you know before the change occurs.  In most cases, they can apply the higher rate only to purchases and other transactions you make after you get the notice.

A variable-rate APR or variable APR changes with the going interest rate, such as the prime rate published in the Wall Street Journal. The cardholder agreement will say how a card’s APR can change over time.

When shopping for a loan online, think about the following:

• Are you on a lead generator site or the site of an actual lender?
• Is the lender’s contact information – street address, phone number, and email address – easy to find in case there is a problem later?
• Is this lender licensed by your state or a federally chartered bank?
• How will you repay the loan?
• How much will it ultimately cost?
• Is there a fee for early repayment?  And how easy is it to change payment dates, methods and amounts?
• Will the website protect your Social Security number, checking account number and other personal information? What are the privacy and opt-out policies? Can you restrict the site from selling your personal information?