Common Sense Money Management

It is amazing how much simple mistakes can cost a person over the years.  A common example is banking fees.  A single overdraft fee can cost $39!  And bank like to play tricks like computing the withdrawals first in day THEN tabulating the deposits.  This banking trick can cost you.

It is pretty easy to avoid this these pricey fees.   First find a bank/credit union that offers overdraft protection.  One kind will automatically transfer from savings to checking if there is is a potential overdraft.    A second, more powerful kind features an unsecured line of credit that will cover overdrafts but charge and interest rate.   I have had both for years .   If there is not enough money in checking, money is automatically pulled from savings.  If there is not enough money there, it comes out of the line of credit.  I have not paid an overdraft fee since I set this up years ago.

Bottom line: don’t settle for crappy banking.  Read the fine print and shop around.   Personally I’ve tended to have better luck with credit unions than with banks… but everything varies.  There are some good banks out there and some good credit unions.  Just avoid the bad ones.  And if your good one turns bad have the cojones to switch to a better institution.

Another area to avoid pesky expenses is with credit cards.   An important step to avoiding late fees is to set up an automatic monthly payment of your credit card(s).    Doing so can help avoid any late fees.  For example I have my two credit cards set up to be paid $100 every month a day  before the due date.   This does not pay off the full balance, but will pay the minimum balance and avoid a late fee.   Typically I will pay the full balance on line as well.

This advice will help you avoid fees.  Next I will give a few tips about how to make a little profit.

The first tip is to check out “dividend rewards” checking.  This is offered by a lot of banks/credit unions.  Typically an above market interest rate is paid on checking accounts, say 3.51%, if certain actions are followed on a monthly basis.  Usually these actions include one direct deposit into the account each month, one monthly withdrawal (say a credit card payment), and 12 debit card transactions.

This does take some discipline.  Banks make money because people fail to jump through the debit card hoop each month.  But if you are disciplined it is pretty easy.  Use your debit card early in the month for small purchases at say, your favorite latte store.   Use it to buy lunch.  Make your you make the minimum amount of debit purchases each month by tracking you account online.  Then laugh all the way to the bank as you see a nice interest rate.

Finally, find a credit card that pays cash back.  (Do this only if you have the self discipline to pay off the monthly balance in full every month.)  There are cards that pay 1% cash back on every purchase with no limit.  Pay your monthly expenses such as utilities, internet, cell phone, etc. on this card.  Bingo, instant 1% discount.   When you buy a car put the max on this card [often $3000 or $5000] and get some bucks back.  This is small but it will add up.   Just remember, this only works in you favor if you pay off your balance in full every month.

These “tricks” are really pretty simple, but effective.  They require investigation, discipline, and tenacity.  But if you use them correctly they can help keep a few extra twenties in you proverbial wallet every month.  And that will add up over the years.  Be bold, be persistent, and yes a little paranoid and you can profit.

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