Banks provide a service to you (if you use one). They safeguard your money…the alternative is to store it in a box in your house, and pray that you don’t get robbed or a fire doesn’t destroy your house.
Banks provide this service and make money on this by two methods:
1) They loan out a fraction of the money you store and make interest on this money. Some of this interest, they share with you.
2) They charge fees for convenience services. These convenience services are usually to help bail you out of a situation. One such convenience fee is being able to use a competitor’s bank ATM to access your money…usually because you didn’t plan ahead to withdraw enough money.
One bank fee that affects many people is overdraft…if you have this protection, the bank will pay the charge that is greater than your current balance. For example, you charge $15, but your balance is only $10. If you have the protection, they will pay the $15, and you owe the $5, but they will charge up to an additional $35! Do it again later in the day, and now you owe $70 in fees.
Solve this problem in two ways:
- Turn off Overdraft protection.
- Always withdraw cash from a same-bank ATM so that way, you don’t spend more than you have.