Are You Losing Your Money?

Saving for college or any other expense is hard work and sometimes it takes years of odd jobs and part-time salaries for it to pay off. Getting a checking account and savings can help with paying the bills and building credit. However, what you've saved can easily be taken away even though you haven't spent a penny.

What people don't know about hidden monthly fees may cost them, up to $100 a year! With the added cost of ATM charges, Debit/Credit card charges, Late Fees, Statement charges and Transfer Fees, you could end up paying up to $300 a year, or more.

It all adds up and it all goes to the banks. According to Greg McBride, CFA, of Bankrate.com, monthly service fees for interest-paying accounts hit a new high level-up a whole dollar in 2007, to total $11.72 on average. That's $140.64 worth of monthly fees a year!

What you don't know...

There are also charges for Overdraft Fees and Savings Excess Withdrawal Fees. Banks aren't mandated to notify their customers when they charge these fees and they may only appear on paper statements or online account statements. Overdraft Fees happen when you take out more than the available balance. The available balance is different from the actual balance in your account and is usually less than the total.

For example, if you make a deposit and ask for a balance receipt, it will look like this: Account Balance $1,200/Available Balance $1,000. If you take out more than the available balance, you will be charged a fee, even though you may have an extra $200 in the account or have just recently made a deposit.
It takes a few business days for the bank to properly record the deposit and if the account is withdrawn the same day, they can charge you.

Here's another example. You got your paycheck on Friday and deposited it at the bank. Your first balance in the savings was $300 and your check was for $100. However, you withdrew $125 the same day. The bank will record only your first balance ($300) and charge you an Overdraft Fee because you now have $175 (which is below the minimum balance requirement of $300)-even though you just put in $100 that same day.
This happens to many people but a good rule of thumb is never deposit and withdrawal the same day.

A Savings Excess Withdrawal Fee happens if money is withdrawn from the savings to cover the checking account when it is overdrawn. Banks have been known to charge as much as $20 for this fee. If you add on the Overdraft Fee, then you would pay a total of $40 or more.

There are also limits to how much can be withdrawn from the account and when. Certain accounts only allow you to withdrawal three times in a one month period. They also have limits on how much is taken out, depending on what amount there is in the savings or checking. Going over this limit will result in penalties and extra charges.

Can you live without a banking account?

With so many fees and so many charges, why should anyone have a banking account? It is possible to live without a bank account but it's much harder to do so. The real question to ask is, "Which bank account has fewer or no monthly fees?"
The way to answer this is to ask yourself, "What do you mainly use your accounts for?"

Checking accounts are used for bill paying, purchases and credit building. Savings is used for saving money toward your goal, whether it be a college education or a house and it is a good back up for your checking account in case it is overdrawn.

If you have a steady job or income then you're more likely to get an account with fewer or no fees. With Direct Deposit, you can deposit your checks on a regular basis and maintain your minimum balance. Maintaining a minimum balance is crucial to avoiding fees.

A minimum balance can range from $1,000 - $10,000, depending on what type of account it is and how much you regularly deposit. Higher minimum balances usually have no fees but require more than one account with the bank and can include a checking, savings, loan or credit account. If you have more than one account at the bank, you can link them to waive the minimum balance requirement.

Lower minimum balances have more fees but can be waived if you have three linked accounts with the bank, use direct deposit or maintain the minimum balance. If you plan to write many checks, take money out of your account regularly and pay bills then you may need to maintain a higher minimum balance to keep those fees low.

However, if you're a student who just needs some extra cash then a savings account is a good choice instead of a checking account that requires a minimum balance.

Banking online can also save money when you view statements online (it can save up to $7 in statement fees) and you can pay your bills online without the hassle of postage payments or late fees. Automatic payments can be scheduled but be sure there is enough money in the checking account first!
Also, watch out for ATM charges ($2.50+) and avoid them if possible. Using your debit/credit card less can save you miscellaneous charges too!

Find out more!

If you know about monthly fees and if you know what they charge then you can avoid paying the extra cash that you need to save. The best way to compare service fees is online where you can see the bank's policy side-by-side with others. Research and find out for yourself what's included in bank services and what costs extra.

You can also go to CNN.com and take the Money 101 test to find out what you need to know about your money.
(http://money.cnn.com/magazines/moneymag/money101/lesson3/index.htm)

More sources:
_{Greg McBride, CFA, "Monthly service fee for interest-paying accounts at new high." Bankrate.com
Rip Off Report, "Fifth Third Bank EXCESSIVE SAVINGS WITHDRAWAL FEE caused Overdraft."Ripoffreport.com
Jane McGrath, "Do I really need a bank account?" HowStuffWorks.com
Carolyn Bigda, Kate Nugent, Donna Rosato and Cybele Weisser, "35 most outrageous fees (and how to avoid them)." Money Magazine}