Before You Say “Yes I Do” to Your Bank

Here are five things that you absolutely need to know about banking before you sign the dotted line for an account.

You should never pay a monthly maintenance fee for a checking account #

The monthly maintenance fee can be surprisingly expensive, costing more than $10 per month. Most banks have multiple ways to avoid the fee. The most common is to have your salary deposited directly into your account each month. Another common option is to maintain a minimum balance. You can usually trigger the fee even if your account falls below the required balance for just a day. The difference in minimum deposit requirements can be dramatic.

Linking your credit card as overdraft protection can be costly #

Many banks encourage you to link your credit card to your checking account for overdraft protection. Although this can be cheaper than being hit with a $35 overdraft fee, it can still be an expensive way to borrow money. First, your checking account will likely charge you an overdraft protection transfer fee, which is typical $10 – $12. Second, most linked credit cards treat the transaction as a cash advance. That means you will be charged a cash advance fee on the credit card, which is usually around 3%. In addition, interest will accrue immediately at the cash advance rate, which is normally above 20%.

Avoid savings accounts at bricks and mortar banks, unless you get excited by a less than 5% interest #

We live in a world of extraordinarily low-interest rates. But the interest rates paid by traditional banks for savings accounts are shockingly low. The largest banks are paying 0.01% on savings accounts for entry-level accounts.

ATM fees are getting more expensive, and are completely avoidable #

Bank ATM fees continue to increase. If you use an ATM of another bank, you will typically get hit with two fees. You will be charged by the bank that owns the ATM and by your own bank. Those charges can add up quickly.

Apps are replacing branches. You should consider the quality of an app when choosing a bank #

Basic banking transactions are increasingly migrating to mobile phones. You can now deposit checks, transfer funds, pay bills, view statements, dispute transactions, and wire money using your mobile banking app. Given the importance of mobile banking apps, you should consider the commitment of the bank to mobile banking when making a decision on where to bank.