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When was the last time you wrote a check? Your answer is probably “it’s been awhile.” Checks were used for only 3% of payments in 2023. Even though checks are less common these days, your checking account is still the hub of your financial life. You likely spend from it daily, but ignoring red flags or using it carelessly could be costing you more than you realize. From racking up unnecessary fees to missing out on better banking options, there are plenty of pitfalls to avoid.
In this article, we’ll reveal 10 common checking account mistakes and show you how to steer clear of them so you can keep more of your hard-earned cash where it belongs: in your pocket.
Costly and Common Checking Account Mistakes to Avoid
1. Being Too Loyal
It’s tempting to stick with the same checking account forever, but your loyalty may cause you to miss out on earning money. Checking accounts often offer promotions and bonuses to new customers. Plus, as you move through various stages of your life, your banking needs may change. Other banks may offer different features and products that are a better fit for you.
Whether you’ve been with the same bank for 10 years, feel like you’re not getting enough from your bank, or need something like an auto loan, feel free to shop around! Who knows: you might learn that there’s a much more lucrative world waiting for you just down the block.
2. Insisting on a Brick-and-Mortar Branch
If you haven’t at least considered an online checking account, you might be missing out. The idea can be a little uncomfortable–especially if you’re using the same bank as your parents or picked the branch with a drive-thru closest to your office–but online banks offer some of the most feature-rich accounts on the market today.
Online banks are exactly what they sound like. They don’t typically have branches that you can walk into. The lack of a physical location means you can’t talk to someone face-to-face. However, with a slew of tech features and enticing account offerings, online banks more than make up for what they lack.
Online banks are usually free, meaning that you don’t have to worry about monthly maintenance fees. They typically offer a smartphone app–often with mobile check deposit–so you can still manage your money on the go. Plus, most of them also offer higher-than-average savings account rates, making it a great place to do all of your banking. The only thing they’re really not good at is depositing cash.
3. Paying a Monthly Fee
No one should be paying a monthly fee just to allow a bank to hold their money. Free checking accounts are incredibly easy to come by these days. Most online banks are free (as we talked about in #2), but many brick-and-mortar banks also offer free checking account options. If you’re paying a monthly fee just for the convenience of using a certain bank, you’re overpaying.
Some banks have “free” checking accounts, but to avoid the monthly fee you either need to keep a specific minimum balance, receive direct deposits into the account, or use a debit card a certain number of times. That’s fine if you want to stick with an account like that–just make sure that you’re meeting the requirements to avoid the monthly fee.
4. Paying ATM Fees
No matter which bank you use, there are ways to avoid ATM fees. Some banks have a large network of ATMs to choose from, so you can almost always find one nearby that allows you to withdraw cash fee-free. Others, like online banks, may have a smaller network of ATMs, but many also offer an ATM fee refund each month.
Figure out which option your checking account offers and utilize it. If you simply can’t get to an ATM that’s in-network, you can still avoid the high fees involved with grabbing cash. You can always pay for a purchase with your debit card and choose cash back. There are also money-sending apps, such as Zelle and Venmo, if you need to pay someone back but don’t have the greenbacks available on hand.
5. Keeping Too Little In the Account
Overdrawing your account is expensive. Once your balance dips below $0, every transaction that comes through is subject to an (often sky-high) overdraft fee. This means that a $1.50 gas station purchase could easily wind up costing you $36.50, if you don’t track your balance. We’ll talk more about overdraft fees further below.
The point here is it’s best to keep a buffer of at least $100 in your account. That way, if a merchant accidentally runs your card twice, or you forget about a recurring payment, you won’t wind up in the red. You should also be checking your account daily and watching the balance, as well as tracking your transactions as you go. If your account starts getting too low, be sure to transfer from savings or make a deposit before you go in the hole.
6. Keeping Too Much In the Account
Keeping too much money in your checking account means you’re missing out on higher interest rates. That is, after all, what savings accounts were designed for: to save and collect interest. If you’re keeping significantly more money in a checking account than you actually need each month, then you are missing out on potential interest earnings that could net you money each year.
Instead, put just enough in your checking account to cover your monthly bills and spending, and watch the balance as you go. Put the rest in a high-yield savings account, where it can earn maximum interest, and then transfer some into checking if you spend more than expected.
7. Not Watching Your Balance/Transactions
Now that most transactions are digital, most people don’t balance their checking accounts anymore. But you should still track withdrawals and bills so you know where your money is going and to prevent any nasty surprises, such as overdrafts. You may also be losing money on subscriptions you never use, so keeping an eye on your account is a good way to spot those. Lastly, if you check your account frequently, you’ll be able to spot any fraudulent charges right away so you can alert your bank.
8. Failing to Really Understand Overdraft Protection
If your checking account offers overdraft protection (and most do), it can be both a blessing and a curse. If you don’t enroll in overdraft protection, any charge that would bump your account to below $0 is declined. This means checks, debit card transactions, or check card purchases are all declined or returned.
If you do enroll in overdraft protection, your checking account can cover checks or debit card transactions that come in even if your account dips to a negative balance. This can be helpful if you want to avoid things like a returned check charge, or even just a denied card at the grocery store checkout. However, it comes at a price.
Each transaction that comes through once you cross below that $0 threshold is subject to an overdraft fee. Some banks have a courtesy period, where you can deposit cash within a business day and avoid all fees. Most, though, are happy to charge anywhere from $20-$40. The CFPB did enact some consumer protections on overdraft fees, but any bank with over $10 million in assets can still charge you whatever they want as long as they disclose the amount beforehand.
If you have a large charge that drops your account to $0, and then have three very small charges come through–let’s say they’re only for $2, $4.10, and $6.40–you can expect most banks to sock you with three hefty overdraft fees. That $12.50 in charges could easily cost you $105 in fees alone at many chain banks.
Enrolling in overdraft protection can spare you returned check fees or simply the embarrassment of having your card declined. But if you aren’t careful, it can be a very expensive feature to have.
Related: Best Banks With No Overdraft Fees
9. Shopping Online
Almost everyone shops online. It’s convenient, it’s often cheaper, and we just don’t have the time to walk the malls anymore. But shopping online with your checking account is risky.
Ideally, you should opt for a credit card for online purchases because of the laws limiting your liability on fraudulent purchases. Whereas if your checking account is hacked, you could be out hundreds or thousands of dollars. Some credit cards have virtual card numbers you can use, which means it generates a number just for one purchase.
10. Using Weak Passwords
The three most commonly used passwords are 123456, admin, and password. All of these take hackers less than a second to crack. Come up with a word not easily guessed, like a nonsense word with symbols in the middle (write it down) and use multi-factor authentication. It does take slightly longer to sign in to your account, but not nearly as long as it will take to reconcile your account if you’re hacked.
Bottom Line
Checking accounts aren’t the most glamorous financial products around, but they’re necessary for almost everyone. By avoiding these 10 common missteps, you can ensure that your checking account runs as smoothly (and affordably) as possible.