Are you managing your checking account wisely? Find out some blunders to avoid with checking accounts.
Two of the best tools you may have for managing your money are a checking account and a debit card. But it matters how you employ them.
According to Alexander Lowry, executive director of Gordon College’s Master of Science in Financial Analysis Program in Wenham, Massachusetts, checking accounts help you keep better track of your spending. You become more aware of your spending habits when you keep track of your debit and check transactions.
It may seem simple enough, but depending on how you manage your bank account, you can be underfunding yourself unknowingly.
What are some pitfalls to avoid with checking accounts? Here is a list of the most typical errors you are making with your checking account to help you respond to that:
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1. Managing your checking account as though it were a savings account
Checking accounts are primarily utilized for daily purchases and bill payments. Your go-to tool for achieving both short- and long-term financial objectives is a savings account. The top error to avoid while utilizing a checking account is confusing the two.
It could be tempting to keep some money in your checking account if it is the bank account that you use the most. However, according to Andrew Rombach, a LendEDU contributing editor, there are three reasons to store your money in a different savings account:
Interest: According to Rombach, “you typically will not receive interest on your checking balance, therefore you are leaving money on the table.” Consider switching to a high-yield savings account instead.
Security: While the money you frequently need to access for day-to-day expenses is kept in your checking account, you might want to keep the money you need for anything else—like an emergency fund or long-term savings—in a different account. Since you swipe your debit card to make purchases, Rombach warns that your money may be more susceptible to scammers in a checking account.
Accountability: According to Rombach, if excess cash isn’t saved, you’re more likely to spend it. Whether or whether you’ve designated it as “savings” in your budget, the more money you see as “available” in your bank account, the more you’re inclined to spend.
2. Maintaining a checking account with high fees
According to a poll done for the personal finance websites Bankrate and MONEY, the typical adult has had their primary checking account for around 16 years.
Loyalty has many benefits, but it may backfire if you’re also committing a common error with your checking account by paying excessive fees. This can apply to charges for overdrafts, ATM withdrawals, and regular maintenance.
3. Dismissing email and text alerts
Banking alerts by text and email are a practical method to monitor your accounts. On the list of mistakes with checking accounts to avoid is not using them.
You run the risk of losing track of your money if you don’t use these alerts, warns Rombach of LendEDU. That can leave you short on money when you really need it, or worse, it might put you in danger of overdrawing your account and paying an overdraft fee.
4. Not protecting your account when making online purchases
Online shopping is handy, but if you want to protect the money in your checking account against theft, you should be careful how you use your debit card information.
Online shopping blunders with checking accounts include using public Wi-Fi and paying with your debit card through apps from questionable sources. Robinson advises against directly providing a business with your debit card information when making online transactions. Instead, use a secure third-party payment app.
This will prevent the recipient from receiving your personal financial information when you make a purchase, she explains.
5. Failure to maintain a buffer
Cutting your balance too close to zero is a checking account mistake that should be avoided, even if retaining too much money in your checking account could result in missing out on interest profits. Any purchase, no matter how modest, could therefore cause your account to go into the red and result in an overdraft fee.
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Consider managing your bank account differently.
Your financial situation might be improved by avoiding frequent blunders you’re doing with your checking account. When your spending is under control, saving money is easier to accumulate, which is crucial if you have significant financial objectives. You may manage your bank accounts to meet your demands by being aware of the checking account blunders to avoid.
