Shannon McNay is a transplanted Midwesterner living and writing in New York City. You can follow her on Twitter at @shannonmcnay.
A few years ago I was a recent college grad having trouble finding work in my field (sound familiar?). With a precious degree in hand, my ego wouldn’t allow me to stay at the restaurant that paid my bills all through school. So I temporarily gave up on the idea of finding the job of my dreams and took a job as bank teller. It turned out not to be such a bad gig and I ended up learning a lot. I was actually shocked to learn how little I knew about the banking industry, and further shocked to see that my customers were just as in the dark as I was.
A lot has changed in banks since then, notably the shift away from sales and towards creating a more positive experience for customers long-term. But even before that shift I learned that there were a lot of resources available to truly help customers, if they only knew about them. Here are five basic principles that you should know to better take advantage of these resources.
1. Trouble Doing a Budget? Help is Available.
Most people understand the basic idea of keeping a budget, but few people take the time to do it. The impact this can have on your finances should not be taken lightly. If you are having trouble maintaining a budget or even understanding how much of your money should go to what, stop by your local branch. All you have to do is ask for a financial advisor or personal banker and they will happily sit down to talk to you about this.
2. Don’t Forget to Build a Savings
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Everyone knows they should have money saved up, but it’s not always that easy. Conventional wisdom says you should have three month’s salary tucked away in case of unemployment, disability, and other emergencies. However, many people live paycheck to paycheck or put a great deal of their money towards debt. So what are they supposed to do?
Talk to your branch’s personal banker. More and more banks these days are offering special savings accounts that reward you extra money based on length of time the account is open or reaching a certain dollar amount. Who doesn’t want free money? And you don’t have to put away hundreds of dollars a month to make this happen. Even if it is just $25-$50 per month, it is a start. You can ask for a savings account that doesn’t have a minimum balance requirement and better yet, one that automatically transfers a certain dollar amount from your checking each month. That way you can make sure you are saving, no matter how big or small the amount. Just remember not to withdraw from your savings too often because you will get hit with fees. The purpose of a savings is to keep your money locked in and is set up so it will stay that way unless there’s an emergency.
3. Track Your Spending
I mentioned above that keeping a budget can seriously impact your finances. Do you have any idea how much per month you are spending on food, entertainment, or groceries? We’ve gotten so used to swiping our debit cards for every purchase that it can be hard to see the big picture. That is why it is so important to track your spending. Maybe you could be saving significant portions of your income every month by simply making small changes in each category.
This sounds nice but I’m sure the idea of keeping receipts and doing a ledger seems too tedious to be worth it. But again, banks are changing and many now offer a way to do your budget online. All you have to do is look on their website or talk to a personal banker to get you set up. Then just set aside five minutes at the end of each day to plug in whatever went in or out of your account and all of a sudden you have a clear picture of exactly what you are spending.
4. Account Balance vs. Available Balance
This one got a lot of my customers into trouble and has even messed me up a time or two before I worked at a bank. Put simply, your account balance is the total amount of money in your account right now. Your available balance is what is left of that money minus or plus any pending transactions I had quite a few customers who thought they could check their available balance and spend whatever that amount was, but that’s not usually the case.
Here’s why. When you swipe your debit card and choose the debit option, you enter your pin and the money exits your account immediately. However, when you choose the credit option you do not enter your pin and no one can say for certain when the money will exit your account. That depends entirely on when the merchant batches their receipts — and that could take days. To further complicate things, merchants may initially authorize less or more than the amount of your purchase. A restaurant will typically authorize more because they give you the option to enter a tip after the card has been swiped. A gas station only authorizes $1 usually. In both cases, either the higher amount the restaurant authorized or the simple $1 the gas station authorized is what will show in your available balance. But a few days later when the receipts have been batched, you will see the difference in (or out) of your account.
That means you have to be very careful because even with the available balance you may not have an exact picture of what is available for you to spend. The only way to be sure of what you have is to maintain a budget. By putting the receipts into a ledger at the end of the day, you know exactly what to expect and know better than to trust whatever your online balance tells you. Also, choose the debit option for the purchases you make via your debit card whenever possible to have a better picture of your account balance.
5. What it Really Means When Your Account Goes Negative
I can’t tell you how any times I had customers come up to me upset because their accounts went negative. They always wanted to know two things: (A) why would the bank allow me to spend more than I have and (B) how can they charge me fees for basically not having enough money?
First, banks assume you know how much money you have. Therefore, if you swipe the card or write the check even though you may not have enough funds to cover it, they will let it go through thinking you really need it. The thing that is not so fun is that this is considered a loan and loans cost money, hence the fees. For every negative transaction, a fee. For every day in the negative, a fee. The good news is that banks are now putting caps on the amount of fees that can be charged in one day and they are delaying the time it takes for them to start charging a daily negative balance fee. Another thing to keep in mind is that there is a limit to how much you can go negative. That number is based on your history with the bank. They are providing you a loan, but they won’t allow your more than your financial history shows you can handle.
What if you don’t want that loan? What if you don’t even want to risk paying those fees? Talk to your personal banker about setting yourself up with “overdraft protection.” There are three common products available: a credit card, a savings account, or a reserve line. (A reserve line is a line of credit that cannot be used for anything else – therefore you get no card or checks with this product.) In all instances, whenever your account goes negative the balance will get moved to whichever these options you chose. If you don’t like the idea of having one of these products linked to your checking account, then the only way to ensure that your account doesn’t go negative is to keep a budget and update it daily.
It is not unusual to think that all banks are evil and exist only to hold your money and charge you for it. But I hope you’ll see from these tips that banks are also there to help you! My biggest frustration as a bank teller and later personal banker were that my customers only asked me questions after they had some sort of problem. These days there are so many products and tools that banks offer to help you secure a better financial future that you’d be crazy to miss out on them. So take some time out of your lunch break or your weekend to go to your local branch and ask your personal banker to examine your accounts with you. You may be surprised to see how happy you end up!
Image by myfuture.com