You may have money leaking out of your accounts and not even realize it. Here are a number of possible ways you are letting money drain out of your accounts and how to stop these leaks.
Banks like to charge fees for many services to make the customer’s life more convenient. However, that doesn’t mean you have to make use of them.
ATM Fees: Banks will often charge a fee of $0.50 to $2.00 to use an ATM that doesn’t belong to your bank’s network. While that ATM next to or in the store may be very convenient, it can be expensive over the long run to use it.
Money Transfer Fees: Most banks will charge for some electronic transfers of money, but not others. For example, most will charge for doing a wire transfer, but often will not charge for an Automatic Clearing House (ACH) transfer. If you are sending money from your bank account to someone else’s account, rather than wiring the money you might set up an ACH with their account information and be able to do a transfer fee-free.
Other fees that you can avoid are minimum balance fees by making sure that your balance is always over the minimum amount. Several tools such as the bank’s own mobile apps or independent budgeting apps can give you up-to-date balance information so you know when you are getting close to that minimum.
Another fee that can be added to your account is an overdraft fee. Make sure, again, that you know what your bank balance is before making a purchase that would take it below zero. If minimum balance and overdraft fees are an issue for you, investigate to see if there is a different type of account that allows no minimum and allows brief overdrafts without charging fees. As a daily money manager, I do have to say that if having to deal with account minimums and overdrafts is a common occurrence, you may need professional help to learn to manage your accounts better.
Credit cards will slap on a $20-$40 late fee (and interest fees) if you fail to make a payment each month. These can add up to hundreds of dollars a year. Avoid the late fee by making sure that you pay the minimum amount by the due date each month. Since these are usually due on the same day of the month, set a reminder to verify a payment has been made. This is particularly true if you are using paperless billing and you don’t pay attention to the emails letting you know when a new statement is available. An even better method is to pay off the balance each month if possible.
If you use online banking, you should be able to set a payment date to be in the future. Thus, you can act on the statement by setting up the payment when the statement arrives, but then set the payment date to be close to the due date. But see my comments above about tracking minimum balances and overdrafts and make sure those future payments aren’t going to take you below your minimums.
Newspapers, mobile apps, and more can be set up with regular automatic payments. This adds a nice level of convenience, but it can also leak money from your accounts. On a regular basis, you should go through your credit card statement or checking account statement to look for these regular deductions or charges and make sure you are still using these apps or services. If not, then cancel the subscriptions and check future statements to make sure the charges have stopped.
Investment Money Leakage
Investment accounts can also be a source of money leakage. Transactions fees may be charged when buying or selling investments. Many brokerages have reduced or eliminated these fees for stocks and ETFs (Exchange Traded Funds) as well as some mutual funds. Review your brokerage statements over a period of 3 months to a year to see how many transactions there are and if there are fees being charged for them. For every dollar paid in a fee, that is a dollar that is not being invested and growing your account.
Mutual funds themselves have fees that reduce their performance. Look at a mutual funds fees to see what is being charged. Any amount over 1% these days should be reviewed to see if it is specialized enough to warrant that fee. Most mutual funds that average investors are invested in should be under 1% and ETFs should be even lower (0.05% to 0.25% is their usual range).
By reviewing your statements and accounts, you may find that you are spending hundreds of dollars that you don’t have to spend, or shouldn’t be continuing to spend on. Take the time to stop those money leaks and keep more of the money you worked so hard to acquire.