In my experience, I have compiled a list of three tools offered by *almost* every bank in the country that are under-utilized. These are tools that the bank offers its customers to help them be more successful. There is no benefit necessarily to the bank when a customer uses these particular tools... except that they lead to stronger financial customers, which is (ultimately) better for the bank. But mostly... these are tools for YOU to use. Use them.
(Note: If your bank does not offer these services, or if they charge a fee for these services, find a different bank. No, I'm not kidding. These are tools that are offered, for free, by almost all financial institutions. If you need banking suggestions... let me know. But really... don't pay money for these tools. Ever.)
1) Checking Account Register
What it is:
For those who don't know, a Checking Account Register ("check register", for short) is a small booklet that looks like this:
In it, you write down all of the purchases you make, any deposits you receive, and keep a running balance of how much you have in your bank account. It was more popular in the past, when people wrote lots of checks... because it took several days for checks to clear your account after you wrote them... and this was a good way to remember all the checks you had written.
Why it works:
Even though check writing is less popular now, a check register is still unbelievably helpful... especially for people who have had trouble budgeting or balancing a checking account in the past. By writing down all of the transactions you make, you are able to be in complete control of the money in your account. Here are just some of the pitfalls a check register could help you avoid:
- Forgotten checks. Ever write a check and then totally forget you wrote it? The check clears your checking account three days later... but, by then, you've spent the money elsewhere and now your account is negative. Oops.
- Held checks. When you write a check, you assume that the person is going to cash it soon. A week goes by, and you'll likely assume that it's been cashed. But lots of people, and even some smaller businesses, don't take their checks to the bank for weeks. Months even. If you write a check in May and it doesn't clear until August, you're likely not expecting it to come out of your bank account. But... if you have a check register and you're keeping a running balance, you've already removed that money from your available balance, so you know not to spend it. (Hint: this also helps you pinpoint when you may have a lost check. If you send it in the mail and it isn't cashed in 2 weeks, there is a chance it was lost or intercepted in the mail. This is important because lost checks very frequently lead to check fraud. If this happens to you, call the person or business to whom you wrote the check. If they don't have it, call your bank immediately.)
- Aged debit card purchases. When you make a purchase with your debit card, a message is sent to your bank that tells them to hold that money aside for the merchant. With most financial institutions, you'll see that money removed from your available balance immediately. BUT... that does not mean the money was paid. The merchant must contact the bank to collect the money, which usually takes between 1-3 business days. (During that time, you'll likely see that debit card purchase as 'pending' on your account.) So what happens if the merchant doesn't call the bank to collect the money? Well, most banks consider a transaction "aged" after 3 business days. They assume that the authorization was done in error, or was voided, and that it will not be collected. So, the bank will usually release it back into your available balance... it's like the transaction disappears. Occasionally (somewhat frequently, actually, depending on the merchant) we see merchants that don't collect on their authorizations for 10 days. So... you see it "pending" on your account, and you assume it's going to be paid. Three days later, it is released back into your balance, but you don't realize it because you think it's already been paid. You spend that money on something else. Then... when the merchant actually DOES contact the bank to collect the money, you're account is overdrawn. Sucks for you because you didn't do anything wrong, but it absolutely WILL cause an overdraft fee and it will be considered your fault. How can you prevent it? That's right, keep a check register. Because, again, even if it takes the merchant 10 days to collect their money, you already have it documented and you know how much money you have left to spend.
Keeping a check register is a great way to keep up to date on your budget, if you're using one (which you should be).
How to use it:
On the first line of the check register, write your opening balance. From there, I've heard that different people find success using different tools. Here's what works most often and takes the least amount of time/effort: Keep your receipts throughout the day. Put them in your wallet. Then, at the end of the day, take 2 minutes to sit down and copy the transactions from your receipt into your check register and deduct them from your balance. That way, you wake up every morning and go to bed every night with the security of knowing EXACTLY how much money you have in the bank.
2) Online Banking
What it is:
Online banking is a free tool offered by most financial institutions to help you manage your money better. As I stated above... if your bank charges you for online banking, find a different bank. This should be a free tool.
Especially working in bank fraud, I hear a lot of customers who express concern that online banking is not safe, or that it will open up the door for fraud on their checking accounts. I frequently share this analogy with them. As I stated earlier, I've talked to over 30,000 bank customers. On a daily basis, I'd say I talk to at least a dozen customers who have been victimized by fraud because of checks, automatic payments (where you give a merchant your account number to take your payments for you automatically every month), debit or credit cards, and ATM machines. Dozens. And yet, in my ENTIRE time at the bank, I've only spoken with ONE customer who had fraud related specifically to her online banking profile. And I've only worked with a handful more who have had serious reason to be concerned about such fraud. I maintain the opinion that online banking is the absolute safest method for managing your bank account.
Why it works:
Online banking is amazing. Really, it is. It allows you a level of control over your bank account that was never possible before. Instead of waiting for your monthly statement to come in the mail, you can access a real-time view of your checking account at any time of the day or night. The benefits to this kind of ease-of-access are unlimited... but here are a few of the best reasons to use this great banking tool.
- Fraud Prevention. It used to be you had to wait until your monthly statement came in the mail to review your account activity. If someone happened upon your account number, they could have 30 days worth of partying on your dime before you even knew that your information was compromised. Not now. With online banking you can monitor your account daily (and I *strongly* recommend that you do), so you'll know right away if someone is using your debit card or checking account numbers without your permission. Knowing sooner means that you can contact your bank sooner to have your account suspended and prevent further fraud. Your bank will also help you file a fraud claim against the transactions you didn't do, and hopefully you'll get your money back fast. (Hint: Why do I say it's important to review your account daily? Different banks work under different procedures... if you have fraud on your account, it can take up to 90 days or longer before the bank is able to refund you the money that was lost. That's a long time to be without your money. So, the microsecond you see something out of place... call your bank. One fraudulent charge is probably easier to live with than 100 fraudulent charges.)
- Disputes. Disputes are a lot like fraud, except not at all. A dispute occurs when you are working with a merchant and they take more money from you than they are supposed to take. For instance, your bill is $70 and they collect $170. That is a dispute... and online banking allows you to catch it sooner. Like fraud, the bank has procedures in place to help get that money back from the merchant. However, it's not technically the bank's job to fix the merchant's mistake... so make sure you try to work it out with the merchant directly before asking your bank to fix it.
- Cross-referencing with your check register. If you go out to dinner, you may not remember 3 days later exactly how much you paid in tip. Online banking allows you to cross-reference the amount that was written in your check register to prevent human error and disputes. Did you write down the wrong amount? That will throw off your check register for weeks to come if you don't catch it. Did the merchant charge you too much for your tip? Your check register will let you know.
- Review automatic payments. If you have automatic payments set up on your account, you can use online banking to be sure that those bills get paid on time and for the correct dollar amount.
- Overdraft protection help. If you log into your account at 11:02pm and see that you forgot about a payment, and now your account looks negative... you can do a funds transfer from your savings account immediately to make sure you avoid fees.
How to use it:
There are a couple of important things to remember if you're going to use online banking. First, your transactions will not show up online in the same order that you made them. So, your online account will probably NEVER look exactly the same as your check register. That shouldn't matter, though. Using the two items together should allow you to avoid any type of situation that could lead to fees on your account.
Because processing happens late into the night with most financial institutions, I recommend checking your online banking in the morning- but not too early. I generally avoid checking my accounts before 6am CST, because there may still be processing happening earlier than that. If mornings don't work, you can check the account any other time, but I recommend trying to get into the habit of checking the account at approximately the same time each day. Some people prefer to check it at night, while they are simultaneously updating their check registers, which is a very good idea if you don't want to feel like you're spending exorbitant amounts of time every day looking at your bank account.
3) Bill Pay
What it is:
The motherload. The holy grail of self-sufficient banking. Bill pay is, in my personal opinion, the best thing that has come into the banking industry since... ever. Another free (hopefully) tool offered by your financial institution, bill pay allows you to take complete and total control over your financial life. I cannot say enough good things about bill pay.
Why it works:
With bill pay, your bank allows you to make payments from your online banking profile. This offers a whole slew of benefits to you, including:
- One-stop shopping to pay your bills. Instead of having to visit 12 different websites or send out 12 different checks to pay all your bills, you can submit ALL of your monthly payments in a matter of 2 or 3 minutes from the comfort of home. And, because all of your bills are listed in one place, it helps you keep track of what has been paid, what needs to be paid, and what was already paid. If you are learning how to budget or how to manage your money, having everything in one place like this is unbelievably helpful to you.
- Fraud prevention. Any time you give your account number or debit card number to a company, there is a risk of fraud. In today's world, even sending out checks (which have your routing and account numbers printed right on them) can be incredibly dangerous. Using bill pay allows the bank to send payments electronically to many of your merchants, which means that the payment is generated WITHOUT having to provide any of your banking information to the merchant. This means that you and the bank are the only people who have your account number.
- Dispute prevention. Here is a fact that a lot of people don't realize. Let's say you set up insurance with Progressive and give them your account number so that they can take automatic payments from your account. Your bank has absolutely no idea what your contract is with Progressive. So, if they have a computer issue, or if someone working for Progressive is not exactly trustworthy... you could see a payment taken from your checking account that you NEVER agreed to pay. Or, what we see more often relates to timing. You and Progressive agree that your payment is due on the 15th of each month. But... Progressive takes the payment on the 13th, and you don't have enough money in your account to cover it. If your account goes negative and you are charged fees, you will likely have to pay those fees out of pocket... the process to get the bank to reverse those can be incredibly long and time-consuming... and sometimes, it doesn't even work. If Progressive sends a request to the bank and is able to provide them your account number, the bank has to assume that this is a valid authorization... the bank does not know your contract with Progressive. This opens the door to all kinds of dispute and fraud situations... so, to prevent it, use bill pay. The bank will send your payment to Progressive on the day that you choose. Nobody but the bank has your account number, so nobody can take a payment when you're not expecting it.
(Hint: Many merchants, like Progressive, will offer you discounts to set up automatic payments with them. They do this because, frankly, automatic payments give them ultimate power. They get to decide when to collect, how much to collect, and why to collect. If the money isn't in your account, they will just try again... and again... and again, until they are able to get the money from you. Meanwhile, you're getting a fee from your bank every time they try and fail to collect the money. It is my opinion... especially for people who are working to re-build credit or re-establish a strong financial foundation... to avoid automatic payments. The extra that you pay on your insurance premium will be much less money out of pocket than what you will pay in fees if they don't do the things they are supposed to do...) - Fee Savings. Most banks offer free stop payments and guarantee their bill pay items. This gives you added protection over writing checks and making your payments manually. Where as you take the risk for any checks you write or payments you make, the bank takes the risk for most bill pay items. (Please check with your bank to know exactly what their policies are regarding bill payments.)
How to use it:
This is another great thing about bill pay- you can use it in whatever what works best for you. For instance, I have all of my personal bills set up to be paid automatically... so there is very little that I ever have to do. I went into bill pay and set it up to pay my bills... I told it who to pay, how much to pay, and what day of the month to pay it... and... that's it! The bank does it for me every month. I just have to log in to my online banking to make sure that everything gets paid correctly!
If that makes you nervous, you can also choose to pay all of your bills manually. The bank will not pay it automatically unless you set it up that way. So if you prefer, you can log in a few days before the bill is due and make a one-time payment for each of your bills.
Make sure you write down your bills in your check register and deduct them from your balance as soon as you submit them online. Some bills cannot be paid electronically and get sent in the form of a paper check. To avoid forgetting about them... you should write them down right away.
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