Finances: What to Know When Opening your Own Bank Account after Split
It may seem a bit counterintuitive, but the less money you have, the more the banks charge you in fees, especially if you have a below-average credit score and don’t qualify for overdraft protection in conjunction with your checking account. So, if you’re trying to rebuild your financial stability after a divorce, you’ll want to find a bank or credit union that offers high-interest rates, low fees, and checking and/or saving account options that best meet your needs.
If you walk into any bank or credit union in hopes of opening an account, you’ll quickly discover you have a multitude of choices for each type of account. But as with most things in life, you’ll need to read the fine print. You’ll probably see promotions for “Totally Free Checking” or “Checking with Interest,” but to obtain the awesome deals being advertised, you typically need to open the account with a high initial deposit, and then maintain a high balance. Otherwise, the account becomes subject to a variety of different fees and ongoing charges that add up quickly.
According to Bankrate.com, a conservative estimate is that a typical American family pays between $600 and $1,000 per year in service charges to maintain their checking, savings and credit card accounts, along with their debit/ATM cards. This does not include interest and fees associated with going over-limit or making late payments. Americans currently pay more than $4.4 billion per year in ATM fees.
A WIDE RANGE OF FEES
Before opening a checking or savings account at a local bank, shop around for the best deals, taking into consideration that banks now try to charge customers for a wide range of services. Some of the potential charges you could be hit with after opening your checking account include:
- Monthly account maintenance fees
- ATM fees (if you use the bank’s own ATM network)
- ATM fess (if you use a machine outside of the bank’s own network)
- Teller fees (for using an in-person teller as opposed to an ATM or online banking)
- Charges for using a debit card more than a pre-determined number of times per month
- Fees for writing more than a pre-determined number of checks per month
- Fees if your account balance drops below a pre-determined dollar amount
- The cost of ordering or reordering checks
- Charges associated with making more than a pre-determined number of deposits per month
- The cost to issue a stop payment on a check you’ve written
- Overdraft fees and bounced check charges
- Online banking and online bill payment fees
12 THINGS TO CONSIDER BEFORE OPENING A CHECKING ACCOUNT
In addition to understanding all of the potential charges and fees that may be associated with a new account, when shopping for the best deals, you also want to take into consideration the following:
1. The interest rate offered for checking or savings. (Bankrate.com reports banking fees are often lower if you opt to open a non-interest earning checking account.)
2. The minimum monthly balance required to maintain the account in order to avoid extra fees.
3. The minimum deposit required to open the account.
4. Whether you qualify for overdraft protection, and if so, what fees and interest rates apply if you tap into it.
5. Whether you receive any rewards for using your debit card to make purchases.
6. Whether a checking account can be linked to a separate savings account (or Money market account), and if so, whether or not it’s free to transfer money between accounts.
7. The availability of customer service representatives at local branch offices, online and over the telephone. Some banks offer telephone customer service 24-hours-per-day, seven-days-per-week, while others offer more limited hours.
8. The hours and days of operation of your local bank branch (when tellers are available to serve you) and the locations of in-network ATM machines near your home, where you shop and where you work.
9. What additional benefits or services are offered to you as a customer of the bank, such as no fee traveler’s checks, money orders or foreign currency conversion services.
10. How quickly deposits are credited to your account and what cut-offs and exclusions apply. For example, it could take an extra day for your funds to appear in your account if you make your deposit after 2 p.m. on a weekday. If a deposit is made on a weekend or holiday, it could take several extra days for the funds to show up in your account. Especially if you’re living paycheck to paycheck, knowing how quickly you’ll have access to funds you deposit is essential.
11. Your financial responsibilities and obligations if your ATM/debit card or checking account is compromised and you become a victim of fraud or identity theft.
12. What services are available to you through the bank’s Web site for maintaining your account, tracking balances, transferring funds, paying bills online, reordering checks, reviewing monthly statements, etc.
SHOPPING FOR THE PERFECT NEW BANK ACCOUNTS
Before opening new bank accounts, determine your needs. For example, how important is it for you to have a local bank branch available to you with extended business hours, especially on weekends? Be sure to visit at least two or three different banks in your area and sit down with an account representative to review your banking needs and the fees associated with each type of account being offered to you.
If having a local bank branch in your immediate area isn’t important to you, because your paycheck will be automatically deposited into your account, and you don’t mind using online banking and ATMs to handle your account management, you’ll typically find better deals (accounts with higher interest rates associated with them, for example) if you sign up with a bank or financial institution whose focus is on online banking, like ING Direct or HSBC.
Also, while credit unions typically have fewer branches than major bank chains, these credit unions typically allow you to earn higher interest, plus offer totally free ATM usage from any ATM machine, regardless of what network it’s associated with. This alone could save you hundreds of dollars per year if you’re currently paying $2 or more each time you withdraw funds from an ATM machine.To find a credit union in your area, visit the National Credit Union Administration’s website.
Once you begin using your account, especially if money is tight, avoid bouncing checks and overusing your ATM/debit card, resulting in your account entering overdraft status. The fees you’ll be charged each time this happens will be $35 or more. Keeping detailed banking records, knowing how quickly funds you deposit appear in your account, understanding how your debit card works when you use it to make purchases, and what automatic and ongoing banking charges you’re responsible for will help you keep accurate tabs on your account balances so you can avoid excessive overdraft fees imposed by your bank.
Understand that the credit card and loan offers from the bank you opt to do business with are seldom the most competitive in terms of fees charged and interest rates. Just because you open a checking or savings account with a specific bank, this does not mean you should automatically obtain a Visa or MasterCard through that bank or apply for your mortgage, mortgage refinancing, car loan or school loan through that bank. Always shop around for the best deals, using the Internet as the powerful research tool it is.
