Banking Should Be Easy and Free

BankingI hope you have a bank account, because with all my ideas you are going to need a place to stash your money.  I have lots of bank accounts because banks love to pay me to try them out.  It isn’t just because I write this blog with 300 views a month, it is available to everyone.1

Checking or savings

You could be fine with just a checking account, but I recommend having one savings account as well.  The reason is that the savings account can earn interest and everything else can be done from the checking account.  I use Discover Bank for my savings account which earns .95% and has great service but shop around, I’ve seen some as high as 1.05%.  I don’t buy the idea that a savings account is just for saving for a rainy day or a big expense because I could transfer the money to my checking account or use it to pay for anything anytime.

I was recently reminded why you can not just have a savings account.  As you can imagine, I have quite a few credit cards, ten in fact.  They are all on auto-pay and connected to various checking accounts.  I saw the card balances getting quite high and decided to transfer money to the various checking accounts from my savings account so I wouldn’t get an overdraft fee.  Well, I successfully avoided that fee but stumbled into the excessive activity fee.  Banking regulations only allow six transactions per month on a savings account and there is a fee for each additional one.  My lesson was learned and I worked to consolidate my automatic payments to be collected from one checking account so I wouldn’t have to guess how much to put in each account.

Opening accounts

When I was a kid, I got a savings account at my parent’s bank and didn’t have a choice in the matter.  I only visited one branch and it was always to make deposits.  Now I am independent and like to have access to ATMs anywhere I go, earn interest, and avoid fees.

Now I have some main accounts and when another bank offers a bonus I will move some money and collect the bonus.  Recently I opened a Chase Savings account for a $200 bonus.  They sent me a coupon in the mail with the terms that you must deposit $15,000 and keep it there for 90 days.  I did the same thing last year and closed the account after six months.  I recently received a mailer that was offering $600 on a $50,000 deposit, so look out for what fits your situation and earn way more than just interest.

One time I even opened a BankDirect account to earn airline miles instead of interest.  A $10,000 deposit over six months earned me 20,000 American miles.  I value that at $300, so not a bad haul.

Fees

Usually, you can avoid fees if you jump through a few hoops, but you have to know the rules so you can jump in the right places.

Account Maintenance Fee

If you are a student you can get a student checking account which will not have a monthly fee.  After that, it is usually some minimum account balance, direct deposit, or fund transfer which will waive the monthly fee.  Ask about it and make sure you can meet the requirements, you don’t want to throw away money.

ATM Fee

Banks will charge you if you use an ATM which does not belong to the bank.  Sometimes you are in a rush or at a cash-only store and you need to make a withdrawal.  These fees can be $2 and up.  I plan ahead to make sure I never have to pay this fee, but I also have a Schwab Checking account which refunds all ATM fees.

Overdraft Fee

This is a fee which can quickly become enormous.  If you buy something without enough money in your account  your bank can allow the transaction to go through and charge you a fee for not having enough money.  They can do this several times a day and at a cost up to $40, this can be costly.  It reminds me of the Louis CK bit about having negative money.

Wire transfer fee

You should be able to transfer money to another person’s bank account for free and if you can’t you could alway mail them a check and pay for postage.  However, if you are paying for something in another country you may have to wire money internationally and will be charged a fee.  They also charge you by giving you bad exchange rates, but you can avoid that by using Transferwise.

How do banks make money?

Banks are paying you interest to hold your money, but as a business, they must make money.  How they do is from collecting fees and issuing loans which accrue interest.  If you want to buy a house you’ll likely have to take out one of these loans and pay them interest.  If you buy a car, please don’t add even more to the costs by taking out a loan.  However, you can certainly avoid the fees, so watch out.

Alternatives to banking

Bitcoin

Instead of keeping money in a bank account you could buy bitcoin.  In 2013 I was into bitcoin speculation and even saw a great opportunity for arbitrage between marketplaces, but I didn’t get rich because the value of bitcoin fluctuates much more than national currencies and can not be transferred instantaneously.

Getting bitcoin used to be quite a process, but now it is very easy if you have a bank account.  Looks like bank accounts are still nice to have.  I would not recommend bitcoin as your means to hold money because it is speculation.  Hindsight is perfect and I would have a bit more money if I hung on to it, just kidding, I would have lost it all in Mt. Gox’s collapse.

Hide your money

Should you be like the man in Jesus’ parable who digs a hole to keep his master’s money safe?  No, just like the parable you will be better off putting the money in the bank earning some interest.  This advice is even more sound with the FDIC’s $250,000 deposit guarantee.

Precious metals

Gold and silver are valuable, so are they the store of wealth that those old guys on TV claim it is?  No, these are speculative instruments which do not even keep up with inflation in the long run.  I recently bought some silver bars to meet the spending requirements for my airline credit card.  The price had to increase 6% before I could break even.

Conclusion

If you are paying to have a bank account, I challenge you to find a way to get your costs to zero.  Also, there are offers for free money out there if you are interested, have funds, and are willing to move them.

The Fine Print

Just like a bank I’d thought I’d add fine print, obviously not everyone can qualify such as babies or money launderers.

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