The Right Way to Fire Your Bank

The reason banks continue to create junk fees is simple: they understand that consumers are creatures of habit; slaves to our own laziness.  Just think about the fees you “agree” to pay when you use an ATM outside of your banks network. Ever paid $4.50 to get $20 out of the machine? Hurts, doesn’t it?  And yet, you do it again and again anyway!

I know the thought of trying to move your money and automatically scheduled bill payments from one checking account to another is often enough for most people to drop the idea before they even get started. But what’s the point in being mad at your big abusive bank and all of the excessive fees you despise, if you’re going to let a little leg work and advance planning keep you from ditching and switching?

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The most important part of walking away is doing it strategically.  If you don’t want the revolution against big banks to ruin your own personal economy (bounced checks and missed payments), then follow these steps to fire your bank the right way.

Step 1 – Open Your New Checking Account – For some of you I understand that this is terribly obvious, but believe me, a light bulb has gone on for someone. All smarty pants, feel free to move on to the next step. . . .  Open your new account with the largest deposit you can handle so that you can begin to wean yourself off of the old account much more quickly. (This does not mean empty out your old bank account. This means use money that is not immediately needed to pay bills.) Get your checks and debit card ordered right away and remember to keep your new account and routing numbers handy to assist with subsequent steps.

Step 2 – Stop Using Your Old Checking Account – As much as it’s humanly possible, I suggest limiting the amount of transactions you run through the old account.  Debit card transactions are obviously easier to semi-control than checks since you can’t force anyone to deposit a check immediately. Stop writing checks from the account at least two weeks before you formally shut it down. Really longer, if possible.

Step 3 – List ALL of Your Automatic Transactions - Online banking will be a great help for this step.  Log in and check out all of the automatic credits, such as direct deposit and automatic debits, such as your bill pay or electronic fund transfers (EFTs) which are more than likely set up individually on your payees’ websites. If you don't have online banking set up, use two of your most recent paper statements. Make a list of any payments that are automatically deducted from your checking account (meaning you do not physically write and send a check or initiate the online payment yourself).  Don’t forget to consider automatic payments that are quarterly, as well.

10 Ways To Avoid Overdraft Fees

US Banks take in over $38 billion in overdraft fees, which equate to more than 75% of the fees they charge on consumer deposits period. With the economy so tight these days, do you really have additional money to throw out the window?  

As I often remind my clients, banks are not charities; they will capitalize off of you as much as you allow them to. Sure it’s highway robbery to be charged an average of $35 for taking a quick swipe at McDonald’s, but the bottom line is if you didn’t have the money in your account, it’s your fault. Banks don’t care if the kids where whining about a happy meal. Your negligence just cost the family $35 for a toy that costs $0.035 cents (yes, less than a nickel) to produce. If this happens to you a couple times a month, we’re talking about nearly $1000 a year that could go towards paying down debt, building up emergency savings or even college and retirement planning.

So, here are a few ways to avoid those pesky overdraft fees.

•     Keep your Register Updated. Simply put, if you don’t know how much money is in your checking account right now, then you are at risk of overdrawing your account. Many people falsely believe that keeping a check register in their head is a good idea.  It’s inevitable that you will forget something. Instead, make it a habit by entering each check or debit card purchase as it is made. Set aside time when you get home to check your receipts and balance your register. Do this every time you spend, and soon it will be second nature.

•     Don’t Forget ATM Withdrawals. One of the easiest ways to lose track of your money is to forget to record cash you withdraw from an ATM. It happens to people all the time – they forget to record the withdrawal and when the bank statement comes they find out they have hundreds of dollars less than they thought. Nip this potential problem in the bud by always getting an ATM receipt. Place the receipt in a safe place. When you get home refer to the receipt to enter the withdrawal into your register.

 •     Remember to Record Automatic Payments. Having your utility or insurance company automatically take payments out of your checking account can be very convenient. Overdrawing your account because you forgot to record an automatic payment is unquestionably inconvenient.

•     Cushion your Checking Account. Having a little cushion in your account is probably the most effective way to stop overdraft fees when all else fails. To create a cushion, record a withdrawal in your register of $50 or whatever you want the cushion amount to be but leave the money there. Try to forget about the cushion and carry on as usual. If you get into trouble and accidentally spend more than your balance that $50 will be sitting there to take up the slack, and hopefully prevent a hefty fee.

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