Let’s face it,

When it comes to banking, most of us struggle understanding how it all works. To top it off, blogs that talk about this subject usually use complex financial jargons such as how the Federal Funds rate affects the yields on your certificate of deposits. Huh?!

Growing up, we were not taught much about how to manage money, or what to say when communicating with our banker. At most, all we were taught was how to balance a checkbook

As a result, nearly two-thirds of Americans can’t pass a basic financial literacy test, according to a FINRA study in 2016.

Although this is the case, learning about money can be fun and exciting. (I wrote about this in a previous blog titled How I Got 5th Graders Excited About Finance.)

Rather than bore you with financial jargons and ratios, I would rather speak to you straight and tell you what you actually need to know about banking, and how to take advantage of the product and services offered.

So let’s talk about the things you need to know about banking at your bank!

Under The Hood Of A Bank:

One of the first steps to understanding a bank is knowledge of the type of products they offer. The core product line that a retail (consumer) bank offers are:

  • Checking Accounts
  • Savings Accounts
  • Mortgages
  • Personal Loans
  • Debit Cards and Credit Cards

In part 1 of this blog,  I will focus primarily on checking accounts. So let’s get started!

Checking Account Features:

Free Checking:

  • Many banks offer free checking, however some research is required when signing up for the right account. Check out Bankrates.com to start. They do a phenomenal job of consolidating the best bank rates and features in one central location for you to choose.
  • BEWARE of minimum balances! Some banks will require you to either maintain a minimum balance between the ranges of $500-$1,500 or have a regular paycheck automatically deposited into your account through direct deposit.

Free nearby ATM access:

Generally, your bank will not charge you for using their machine, but this is not the case if you use another bank’s ATM.

What should you do?

  • Make sure you open a checking account at a bank with ATM locations near your work and home OR find a bank like Charles Schwab’s online banking that reimburses you for using an ATM not affiliated with it.

Online and Mobile Banking:

Why should you use online and mobile banking?

Two reasons:

  1. More convenient way to monitor your accounts
  2. Spot bank errors much faster

What are features to look for?

  • Online Bill Pay: Online bill pay is defined as an electronic payment service that allows you to set up a secure online account to make one-time or recurring bill payments.

Benefits:

  • Pay bills quickly
  • Pay bills on time
  • Pulls payments directly from checking account.
  • Mobile Deposits: Mobile deposits lets you use your mobile device to deposit checks by phone and mobile application wherever you are, 24/7. There’s no need to go to a branch or ATM, saving you time, and making depositing paper checks a quick and convenient experience.

 

Checking Account Best Practices:

  • Monitor your checking account balance at least 2-3 times a week. This helps you spot errors that may show up on your account. Remember, banks can make errors too!
  • Pay your bills online. As mentioned earlier, Bill Pay is a very convenient tool to pay your bills through. All you have to do is enter the name(s) of merchants, the amount you owe, and the date when the bill is due. Then you can set it up for a one-time payment or recurring schedule.
  • Use direct deposit for your paycheck. This feature may cause your bank to waive the minimum balance required, and some banks offer a small cash bonus.
  • Call your bank and contest fees! If you find an NSF fee, debit card fee, or any maintenance fees on your bank statement that you think should not be there, call the bank and make your case! There’s a good chance you can talk the service rep into removing it. I have done this on several occasions and had my bank waive fees for me.
  • Link your checking account to a savings account. This is another form of creating an overdraft protection, but with no cost.
  • Be CAREFUL with interest-bearing checking accounts. Why? Because in order to earn interest in these accounts you are required a minimum balance. Some major banks may request up to $10,000 for a pitiful 0.01% interest. At this interest rate you’ll make a measly $1 at the end of a year. If that is not bad enough, you will be dinged with a $25 monthly fee if your balance drops below the minimum.

 

Takeaways:

As a personal banker myself, I answer questions relating to these topics daily. What I recommend is to make sure that you’re banking with a bank that has your best interest in mind. You will know this by looking up their service fees and seeing what they charge. If you have the time, I also recommend going into a bank in person to feel out the people and their services before signing up. Another great resource to check out is WalletHub, a website that allows you to do Advanced searches on all types of bank products and has a community of users to bounce questions to.

Hope this was helpful!

Stay tuned for part 2 of this blog which will cover more on other banking products.

Another helpful WalletGyde Blog related to this topic is titled 3 Things You Need To Know Before Opening a Credit Card