5 Costly Mistakes When Choosing Bank Accounts

Selecting a bank account may seem like an easy task; however, an error in this area could lead to unexpected charges, loss of visually-enhanced features, and, most unfortunate of all, unnecessary stress on your financial future. Many consumers rush to open a bank account for convenience or because of the brand name, without regard for the economic consequences.

Your selection of a checking or savings account can also significantly impact your everyday financial transactions, limit compound savings growth, and affect your overall financial health if the account becomes dormant. Unfortunately, many find out about certain restrictions after months or years of waiting; watching fees add up, transactions go unfinished, or, worse, losing out on potential investment or earning opportunities.

Let’s unveil five expensive mistakes when choosing bank accounts and how to navigate around them. With awareness of these retributions, you will be able to focus on convenience, growth, and security confidently.

Mistake 1. Not Considering Account Fees

1. Ignoring Monthly Account Fees

Many bank fees are charged monthly, and although they may not look like much on their own, they can add up over time. For example, paying a $12 monthly fee on a checking account equals $144 in a year – money you could have saved, spent, or invested elsewhere.

Solution: Always check for account fees before opening an account. Rely on fee-free accounts or accounts with smaller monthly payments. Many banks will waive charges completely if you maintain a minimum balance or set up direct deposits.

2. ATM Charges and Out-of-Network Fees 

If you withdraw cash from an ATM that is not part of your bank’s ATM network, you are likely to pay an additional fee. Your bank may charge a fee, and the ATM operator may charge a fee and make money as well. Over the course of a year, this may cost you hundreds of rupees and affect your account and budget. 

Solution: Open an account with a large network of free-to-use ATMs, or enroll in a reimbursement program for out-of-network ATMs. Many banks now offer unlimited ATM fee reimbursements, saving you money. Learn more on Zero-Fee Global ATM Strategies for Travelers.

3. Overdraft and NSF Fees that Add Up Quickly

Most people are aware that overdraft and non-sufficient funds (NSF) fees can quickly add up and decimate your bank balance.    Many banks charge high fees if your account drops below zero or if a transaction is returned for insufficient funds.

Solution:  You can search for accounts, but when you are looking for checking accounts that offer overdraft protection or waive fees altogether under certain conditions. Another alternative is to link your checking account to a savings account or line of credit to reduce costs.

Mistake 2. Not Evaluating the Bank’s Customer Service and Accessibility

1. Lacking Customer Support Options

Banking can be incredibly frustrating, even with products designed to help you, due to bad customer service. Even in the case of a charge dispute, a stolen card, or an expedited service request, talking to a poorly trained customer service rep can be excruciating.

Solution: Read customer reviews and inquire about the types of support that your bank offers, including live chat, phone support, or 24/7 support. You will save yourself time, aggravation, and, hopefully, sympathy by doing business with a bank that provides prompt, effective customer support.

2. Limited Availability of Branches or ATMs 

Accessible banking is important. If you choose a bank with limited local branches or ATMs, you put yourself in a position of having to drive farther or face greater inconvenience when it is most needed. 

Solution: Look for banks with a large network of ATMs and branches near your home. Additionally, digital-first banks may offer ATM reimbursements for out-of-network ATM transactions, providing added convenience and potentially greater savings.

3. Lack of Mobile Banking Facilities

Mobile banking is an essential part of modern banking. If a bank account lacks an easy-to-use mobile app, managing funds, making bill payments, or transferring money can be more difficult than it needs to be. 

Solution: Be sure the bank offers a well-rated mobile app with mobile check deposit, bill payments, transfers, alerts, and other features. Search for app reviews on reliability and ease of use.

Mistake 3. Choosing the Wrong Type of Account

1. Choosing a Standard Checking Account You Might Not Use Again 

Some typical checking accounts offer perks such as low interest rates, limited online tools, or fewer features to help you save. While the checking accounts still fulfill their primary purpose, they may not afford you the ability to optimize your income potential or practical conveniences. 

Solution: For the most part, review the different features offered with each checking account (e.g. online bill pay, cashback, savings). After all, a checking account should be more than a place to house your money.

2. Neglecting to Compare Savings Account Offers

The potential consequence of investing in a savings account without including interest rates is the possibility of missing the probability for your money to make money. Even a low-interest account can lose its purchasing power as a result of inflation.

Solution: Find a high-yield savings account, a certificate of deposit (CD), or something else with an interest rate that is competitive. Even a small increase in interest can make a huge difference in your savings over time.

3. Omission of Specialized Accounts

Each financial situation may require a different type of account. For example, students, businesses, and joint account holders may need specialized accounts with unique features. If you ignore these options, you may end up paying higher fees or having less versatility.

Solution: Take some time to research all the accounts available to you so you can pick one suited to your specific needs. For example, there are often student accounts that charge lower fees, business accounts that can help you track expenses, and high-interest savings accounts that can help you get the most return on your money.

Mistake 4. Not Reading the Fine Print on Terms and Conditions

1. Avoiding Fees Related to Maintaining Minimum Balances

Many accounts require you to hold a minimum balance to avoid incurring fees. If you are unable to maintain this specific balance, you may have your potentially valuable savings eroded by fees. 

Tip: Always carefully review the fine print to understand the specifics of the minimum balance requirement. Choose accounts where you can comfortably maintain a minimum balance, thus avoiding unnecessary fees.

2. Failing to Spot Hidden Fees for Service

Some financial institutions assess fees for services that you might have assumed were complimentary. Examples include fees for things like initiating an order for paper checks, wiring money, or using services at a branch. Such hidden costs can start to add up without you even realizing it.

Solution: Take the time to review all service fees and ensure they are appropriate for your banking behavior. Find an account that matches your typical behaviors.

3. Not Monitoring the Interest Rates on Loans and Credit

Some bank account products let you borrow funds through a loan, a credit card, or an overdraft, and these products can charge you an interest rate much higher than you expected. You may not fully understand the nature and terms of these products and may be left to pay far more than you expected. 

Strategy: Before choosing a straight loan, a credit card loan, or deposit interest, evaluate the interest rates. Pay attention to the fees and potential fees that you could be charged to your account.

Mistake 5. Not Utilizing Features Available Through Online and Digital Banking

1. Missing Out on the Advantages of an Online Bank

Online banks and minimal-branch banks are known for offering higher interest rates and lower fees because their lower overhead costs are directly correlated with lower fees. If you’re disregarding digital banks, you’re likely missing out on potential savings and benefits.

Solution: Use an online bank or a minimally affiliated branch bank for a modern, cost-efficient banking experience. Over time, higher interest and lower fees can be a smart investment in your financial future.

2. Lack of Integration with Digital Payment Solutions

Integrating with companies like PayPal, Venmo, or Google Pay will make the transaction easier. If a bank does not integrate well, then it could require an additional fee or an awkward process to complete the transaction. 

Solution: Look for banks that integrate digital wallets or payment systems to make the transfer easier and fee-free.

3. Not Prioritizing Automatic Savings Features

Numerous bank accounts offer automatic savings options, including rounding your purchase amount up to the nearest dollar and depositing the difference into your savings account. Inaction or failure to take advantage of these features means missed opportunities to have your money work for you automatically.

Solution: Open or select accounts that have automatic savings features. Small, consistent contributions to your account can add up quickly over time. Check out Beem for on-point financial insights and recommendations to spend, save, plan and protect your money like an expert.

How to Choose the Right Bank Account for Your Needs

1. Assess Your Banking Needs

Before opening an account, consider your banking priorities, such as low fees, high-interest savings, mobile access, and/or branch convenience. Write down the features that matter most to you and compare account options that highlight those features.

2. Evaluate Fee Structures and Functions of Notable Banks

Examine and contrast banks. Consider any account-associated fees, interest rates, mobile app capabilities, customer experience, and supplemental offerings.

Review dissimilar comparison websites to find the best choices for you. Don’t accept the first account available.

3. Do Not Hesitate to Change Banks

If your current bank is not working for you, switching banks is an opportunity to save money and find services you like better. 

Consider negotiating the fees with your current bank or switching to a bank that offers the features you want. Banking is easier than ever to switch accounts in the modern era.

Conclusion — Selecting the Right Bank Account Can Save You Money 

Selecting the right bank account is more than convenience; it’s a strategic financial decision. By taking care to avoid the above mentioned common pitfalls, you would save time, money, and frustration. Some research and knowledge of bank speak will result in a more effective banking decision, and eventually save money on banking so that your money is making money not costing you money.

Use Beem to get beneficial insights on where to cut costs, where to spend and how to save your money with your personalized Budget Planner.

Take control of your financial future by choosing a bank account that suits your means, offers useful benefits, and steers clear of charges and limits. Download the Beem app today!

FAQs on Mistakes When Choosing Bank Accounts