Banking: Doing It Right
Let’s face it, today’s economy sucks. The average person works two jobs just to make ends meet. Those fortunate enough to have a decent to well-paying job are just above the bracket to qualify for assistance in paying medical bills that need to be pushed aside due to the mortgage. The rich get richer and the poor get poorer, while those receiving welfare checks because they don’t feel like working ride around in their plush luxury cars. If you ever follow the news, you’ve probably noticed the price of just about everything going up, including bank fees.
Fees for catching class seven spectres have reached an all time high.
So why did I just ruin your otherwise positive day with doom and gloom? To make a point that in today’s world, every dollar counts. Knowing where you keep your hard-earned money and what rules your bank have is extremely important in a world where money talks. Before you open an account and sign that signature card, always ask for a written or electronic copy of the fee schedule which outlines the rules and laws of your soon to be account. If you already have an account, you would do well to familiarize yourself with all of the rules and the features your account has to offer.
As an accountant who once worked for a bank who shall remain nameless, I was very surprised by how many people didn’t know how to balance a checkbook. Many people take risks by writing checks with money they don’t have and when they get burned they accuse the bank of taking their first-born child. NSF (Non-Sufficient Funds) fees aren’t cheap and they add up. If your account has a lot of activity, all it takes is one NSF fee to create a chain reaction that can set you back hundreds of dollars. When you see that negative figure looming at you on your ATM receipt or online banking screen, ask yourself, was writing that check before your funds came in really worth it?
No honey, my Spock stand-up poster couldn’t have waited!
Payday loans are extremely popular for people who have to have money now. The most important question you should ask yourself before doing a payday loan is “can I live a few more days without the money?” What people don’t realize is how much money they lose on the interest. The annual percentage rates vary from company to company but range anywhere from 200-500%. What does that mean for you?
Let’s say the payday loan center will charge you $10.00 (loan fee) for every $100.00 borrowed.
$10.00 loan fee x 26 pay periods = $260.00 (yearly charge for the loan)
$260.00 yearly charge / $100.00 borrowed = 2.6 x 100 = 260 % APR.
260% APR…to put that in perspective, the APR of the cards Kmart tries to shove down your throat while you’re at the counter have an APR of roughly 24.99% (subject to change). Notice the difference?
When you roll over the loan into a new term, it’s usually another fee for another X amount borrowed. While you won’t be paying $260.00 if you’re paying off the loan before the year is up, you’ll still be losing a sizable chunk of the $100.00 you started out with. The longer you borrow the worse it becomes. You could end up paying $60.00 for borrowing $100.00…think about that. I’m pretty sure the Godfather himself could make you a better deal.
See that red line? Yeah, that’s the money you’ll never see.
Overdraft protection, most banks offer it. Some banks charge a fee, some waive it. For some accounts it’s waived, for others it isn’t. Always check to see what options you have as backup. For those that live paycheck to paycheck where coming up with money for a savings account isn’t possible, check with your bank to see if they offer a credit card that charges no annual fee. When you get the card in the mail, activate it, make sure it’s linked to your checking account via overdraft protection, and cut it up. The temptation to spend and the interest rate you’re given will only add stress to your situation.
Online banking, how I love thee. People who refuse to join the computer age are missing out. Transferring funds from one account to the next can be a lifesaver. Paying your bills online takes a load off as I haven’t had to write a check or buy stamps in a little over ten years. Yes, that’s right, your bank will cut the check for you and mail it and usually give you points on your VISA points card if you have one. I’ve saved my points for a little over a year and I’m halfway to a free XBox 360…something to think about right? As I’ve mentioned before, double-check with your bank for what they offer and whether or not it will cost you anything. Knowledge is power.
First grade math. Feel the burn.
Possibly the most important piece of advice I give to clients and people who ask is to know what your profit margin is. In order to do that, you need to know what’s coming in and what’s going out. Write it down, create a spreadsheet in Excel, do something to track everything including that ten-dollar cup of chocolate mocha latte with whipped cream topped with sprinkled sprinkles covered in sprinkles topped with sprinkles over sprinkles you got at Starbucks. You should probably go patent that before it’s too late.
Horse tranquilizer for the hour after conumption extra.
In the twenty years I’ve had a bank account, I’ve not once overdrawn it. The secret?
Be aware. Be smart. Don’t take risks. Don’t get burned. Do it right.