The Do’s and Don’ts of Managing Your Bank Accounts

By Alexa Serrano Cruz

According to Finder’s Consumer Confidence Index, about 72% of Americans have kept the same checking account for over five years. If you find yourself in this majority, it might be a good moment to evaluate whether you're making the most of your banking resources.

Here are some essential do’s and don’ts for effectively managing your bank accounts, ensuring you're on the path to financial success.

The Do’s

Keep an eye on your balance

Regularly keeping track of your balance is essential for several reasons. It helps determine whether you spend more than what you deposit and whether you’re close to overdrafting or falling below a certain threshold necessary to avoid fees or earn interest. It also helps to identify any unusual transactions that might indicate fraudulent activity. 

Most online banking platforms allow you to set up alerts to help you monitor your balance and transactions. And if you prefer not to receive alerts for every single type of transaction, you can customize them to notify you when a certain amount of money is spent and when your balance falls below a specific threshold.

Use bill pay

If you find it challenging to keep track of all your bills, consider utilizing the bill payment feature in your online banking platform. Most banks allow you to organize your bills, schedule payments and set up recurring payments. You might also have the option to enroll in electronic bills, which can simplify your bill management by providing digital statements directly to your inbox.

Maintain a budget 

Budgeting is important when you want to manage your finances effectively. Without a clear understanding of where your money is going and how much you’re spending, you won’t be able to determine how much you can allocate toward savings or future expenditures, such as a vacation or home improvement project.

And if you have created a budget, it’s essential to review and update it annually or whenever there are changes in your income.

Keep an emergency fund

An emergency fund plays a crucial role in safeguarding your finances in an emergency, such as unforeseen medical expenses or job loss. And with savings rates at their highest, you have the opportunity to consider high-yield accounts with rates as high as 5% APY — a rate that’s more than 11 times higher than the national average.

If you have an emergency fund, make sure you’re allocating money to it regularly. You can also simplify the process by setting up recurring transfers, which can make saving more convenient and consistent.

Explore other bank accounts 

Approximately 48% of Americans open their first checking account with the same bank as their parents. But what was best for your parents may not necessarily be the best choice for your financial needs. 

Most individuals who bank where their parents do end up at traditional brick-and-mortar banks offering accounts laden with numerous fees and interest rates as low as 0.01% APY. If you’ve had your account for over five years, research and explore other checking account options. You might be pleasantly surprised by the abundance of online banks offering free checking and high-interest savings options. 

The Don’ts

Don’t forget to fund your account

Nothing is quite as satisfying as spending hours researching savings accounts, identifying one that offers a strong rate of return and then making the commitment to open it. But some individuals go through the process of opening the account and overlook the crucial step of funding it. 

This oversight translates to a missed opportunity to actually earn interest. Without any funds deposited, your money can’t work for you, resulting in missed financial gains. The same is true if you deposit a low amount. The more you deposit, the greater your returns.

Don’t use your debit card

While there’s nothing inherently wrong with using a debit card, it's best to minimize its use whenever possible. FICO reports a staggering 368% increase in total compromised cards due to skimming from 2021 to 2022. 

While a credit card is just as vulnerable to skimming, the crucial difference lies in the source of the stolen funds. In the case of a credit card, the stolen money isn’t necessarily yours. So, the credit card company is likely to work harder in protecting and recovering those fraudulent charges. The process time for resolving is also typically shorter than those involving a debit card.

Don’t forget about fees and minimums 

Many checking accounts, particularly those offered by traditional banks, come with monthly service fees and overdraft charges. 

Don’t forget to maintain the minimum requirements needed to avoid these fees. And if you happen to overdraft your account, make sure you settle the overdraft as soon as possible to prevent the bank from reporting it to Chexsystems, which maintains a record of your banking history and can impact your ability to open a bank account in the future. 

Bottom line

In the realm of managing your bank accounts, adhering to a set of smart practices can make all the difference. The dos, which include leveraging bill pay features, budget maintenance, fortifying your emergency fund and looking for stronger account options, help pave the path toward financial success.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Banking