Wednesday, July 18

Day Three Frugal Banking

Before we discuss Frugal Banking, let's take another look at the definition of Frugal;

1. economical in use or expenditure; prudently saving or sparing; not wasteful: a frugal manager.
2. entailing little expense; requiring few resources; meager; scanty: a frugal meal.

With this definition of frugal in mind, let's go on!

Frugal banking is the art of managing you checking and savings accounts so that you entail little expense, require few resources and aren't wasteful. Some of the ways that you can be a frugal with your banking:

Open a free checking account, but beware of the fees (see Fee Schedules below)! If you can keep a small minimum balance and don't write a lot of checks, a free checking account could be your best choice. Do some homework to find out what other checking account options are available. Remember to read the fine print because free isn't always free!

Friendly ATM's are the ones that don't charge you for using them. Banks call these 'foreign transaction fees' and make muchos dinero from them! The least expensive ATM is the one owned by your bank or credit union; they won't charge you a fee for using their ATM's. If you know that you're going to need cash, and you must use an ATM that isn't in your bank or credit union's network, then make sure that you withdraw enough cash to get you by until you can visit your own institution.

Online Bill Payer is one of the most frugal banking steps that you can take! Not only are you saving the cost of postage and checks (remember free isn't always free, see free checking above) you can save your valuable time by setting up bill payer to pay your regular and routine bills on a schedule! But again, watch out for fees! Most bill payer services these days are free, but some banks and credit unions will impose a non-usage charge if you've signed up for bill payer but don't use it.

Dormant account fees are charged when an account, no matter what the balance on deposit might be, hasn't had any recent withdrawal or deposit activity. Why do banks charge a fee like this? Good question. I think the best answer (not necessarily the right answer) is because they can! Does your bank or credit union charge you for leaving money with them? If so, take your money out and run! Or, if you'd prefer to leave your money in the account, stop by and deposit a penny every couple of months!

Account maintenance fees what your friendly bankers might charge you for doing business with them. Here is a nice chart from that covers many of the fees that you could be charged, and what the fees are for.

Make sure that you have enough money in your checking account to cover the checks you write! This may seem obvious, but surprisingly, many people continue to rely on the float that really doesn't exist anymore. Instead, banks and credit unions have come up with a product called Overdraft Protection or Courtesy Pay. These products will cover your otherwise bad check and charge you a fee for doing so. These fees can be OUTRAGEOUSLY HIGH, but are probably still better than writing bad checks. The lesson here is don't try to float a check, make sure that you have the money in the account before writing the check!

You can avoid bank fees by being aware of what they are! Frugal Banking means not being wasteful. By knowing the rules, you can avoid the fouls! Read you account agreement and fee schedule, doing so could actually make you money! How? If you learned something by reading the agreement and schedule that helped you avoid paying a fee, then you kind of made money by not being wasteful with it! Your account agreement is the rule book; it sets out under what circumstances the financial institution will charge you a fee. Being Frugal is being smart. To be smart, you need to know! Read the account agreement so you can know!

Go where the money is! Even modest balance savings and checking accounts can earn really good interest rates if you shop around! The best places to earn interest income on modest balance checking and savings balances are online banking accounts. Recently, ING Direct paid 4% for a checking account with no minimum balance, FNBO Direct is paying 6% for a savings account with no minimum balance, and Capital One Direct was paying almost 5% for a no minimum balance money market account! Don't leave money in the banks and credit unions so that they can fee you for it! Move it to a place that appreciates your business and rewards you for it!

Tomorrow- Frugal Motorist.