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9 Bad Banking Habits You Need to Unlearn

Habits are tough to shake, especially the bad ones. Stick to them for too long, however, and you’ll feel the consequences. Bad banking habits can have major financial implications. This guide will take a look at 9 common bad banking habits and discuss how you can ditch them for more positive ones.

1 Failing to Save

When you join a bank, you’ll likely open two accounts: a savings account and a checking account. These accounts allow you to sock money away or spend it using a debit card or checks. Unfortunately, too many people use their resources to spend rather than save.

Don’t let that savings account go unused. An emergency fund will be helpful in a pinch, and without savings, you won’t make any real progress toward retirement. Make a goal to start setting aside a percentage of your earnings into savings. Commit to this every week or month, and you’ll soon develop a saving habit.

2 Overdrafting

Spending more than the funds available in your account is called overdrafting. Instead of cancelling the transaction, the bank will provide the needed funds, either taking them from a linked account or an overdraft line of credit. Sounds reasonable, right? Think again. Banks typically charge hefty fees for overdrafts.

Fortunately, overdrafting is completely preventable. You just have to be careful with your spending. Before any purchase, make a point to check your account balance through the app provided by your bank. This will help you know when you’re close to overdrafting so you never make that mistake again. In addition, look for a checking account that offers an auto-decline setting. If your account lacks the required funds for a purchase, the transaction will be canceled. No overdrafts, no costly fees.

3 Taking No Interest in Interest Rates

When we think of interest rates, it’s usually in the context of the APR on a credit card or the rate for a home loan. In those scenarios, low is definitely the way to go. But there’s a flip side to the interest rates that doesn’t get as much attention: savings account interest rates. Here, you should be seeking out the highest rate possible so the money in your savings account will grow faster.

Choosing a bank without looking into their interest rates means you might be short-changing yourself. Look online for a high-yield savings account that suits your needs. Consider your options before settling, but do take other benefits into account. Some banks might compensate for lower interest rates by waiving certain fees or offering other incentives. Your current bank may be giving you the best opportunities, but you won’t know unless you check.

4 Overusing ATMs

While they’re a convenient way to get cash, many ATMs charge fees for their services. When you use an ATM from another bank or a third-party vendor, you’ll wind up paying handsomely for the privilege. Relying too heavily on ATMs means those fees will pile up fast. Look for ways to reduce your reliance on ATMs. Plan out your week to determine how much cash you’ll need, then get it from your own bank or request cash back at the grocery store. Use your debit card for purchases, and if you’re reimbursing a pal for a round of drinks, use Venmo or Cash App instead.

5 Not Balancing Your Checkbook

Technology is a wonderful thing, but sometimes people lean on it too heavily. When you got your first checking account, your parents likely showed you how to record your spending in your checkbook and make sure everything lined up. Most banks today have an app that tracks all this for you.

Banking apps are convenient, but they can lead to a lapse of attention, causing you to make some less-than-ideal decisions. Actively reviewing your account statement will help you stick to your budget and control your spending. If you don’t, your spending can quickly put you in the hole.

6 Mishandling Credit Cards

Many banks offer credit cards alongside their standard debit cards. While it’s important to build up credit, far too many consumers use credit cards to spend money they don’t have. This is one of the worst banking habits you can acquire, as it can seriously disrupt your finances.

If you have one or more credit cards, take care not to use them to spend beyond your means. Most importantly, pay them promptly — and preferably in full. When you fail to make a payment on time, you’ll incur additional debt and fees (and harm your credit score). And if you only pay the minimum amount each month, your interest owed will snowball.

7 Letting Your Bank Account Sit Idle

To get the most out of your bank account, you need to use it. This isn’t just to develop good banking habits — not using your account can actually result in “maintenance fees.” In order to avoid these fees, you’ll need to maintain a minimum balance, make a set number of debit card transactions, or meet other criteria each month. One way you can sidestep many maintenance fees is through direct deposit. If your employer sends your paychecks directly to your bank account, you’ll save time cashing your check and avoid that pesky fee.

8 Relying Too Much on Autopay

In many cases, autopay is a blessing. You can set up your mortgage, utility, and credit card bills to be paid automatically. This way you won’t ever forget to pay, and you’ll be sitting pretty — as long as your account is well-managed. There is, however, a dark side to autopay you should be aware of. Many services now offer subscription-based payments, using this convenience to get people to enroll. You might forget about the music-streaming or antivirus services you signed up for, but they’ll keep pulling funds out of your account until they’re cancelled. Forgotten recurring payments can total over $1,000 a year, so inventory your subscriptions frequently and cancel those you no longer need.

9 Doing It Alone

If you feel your bad banking habits are out of control, get help. Financial professionals can give you the guidance you need to turn things around. Seeking professional help is not a sign of weakness, but a testament to your willingness to improve. You might seek out a nonprofit credit counselor, or your bank may provide such assistance. Their services will be more affordable, and the process will be easier since you’re already in close contact. Receiving guidance from financial professionals is a great habit to get into.

Breaking bad habits takes time. Set achievable goals and make small adjustments, and soon you’ll be on a path to where you want to be. Working to establish good banking habits now will set your finances up for a bright future.

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