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10 tips to manage financial risks with checking accounts

July 02, 2015

By Richard Barrington | MoneyRates.com Senior Financial Analyst, CFA


As important as it is to make the right decisions in choosing a checking account, it is even more crucial to manage your checking account properly once it is up and running. Mistakes, or just simple neglect, can be costly.

To understand why, think about some of the contrasts between a checking account and a savings account. A savings account is set up to make you money by paying interest, and typically does not entail regular fees. In contrast, checking account interest is usually negligible, if it exists at all, but the fees come in many forms and can be significant.

A recent MoneyRates study found the average checking account now charges a whopping $13 a month in checking account fees. This includes non-bank ATM fees.

Checking accounts are often harder to keep track of, and much more vulnerable to data theft and unauthorized access. Managing your checking account diligently is important for keeping fees down and protecting your account.

Here are 10 risk management tips for your checking account:

1. Balance your account regularly

At least monthly, check that your records match the bank's. This will help you spot any unexpected fees or unauthorized transactions, and ensure that all your transactions have been properly entered in the account.

2. Look before you swipe

Debit cards are easy to use, but that also means they can quickly get you into trouble. If you have used your debit card a few times already that day, are you sure you have enough money to cover your next purchase? If your balance is running low, it is always best to double check before the next time you swipe your card.

3. Understand that some of your 'available balance' may be spoken for

Speaking of checking your balance, do not be overly reassured if you look at your balance online and see that there is enough money to cover your next purchase. Take a peek at your banking activity and account for pending transactions you have made, but have not yet been reflected in the bank's records. Also, avoid running your balance so low that the next monthly bank fee could wipe it out.

4. Stay up to date on the schedule of automatic transactions

Automatic bill paying and direct deposits are great conveniences, but they can complicate your checking account management when keeping accurate tabs on your balance. Understand what the billing cycle is for your automatic payments so you do not draw down the account just before some bills come due. For direct deposit, always leave a couple extra days before you assume the money is in the account. Sometimes there can be delays in making the transfer and getting it reflected in your account's record - especially if a holiday coincides with your pay cycle.

5. Opt out of overdraft protection

If you follow the above four tips, you should be able to avoid overdrafts, and thus can avoid the expense of overdraft fees.

6. Monitor fees closely

Besides overdraft fees, checking accounts may charge monthly maintenance, ATM and special service fees like statement charges. Keep a close eye on additional charges. To avoid a monthly maintenance fee or other service fees, try to keep up with any minimum requirement spelled out by your bank or credit union. Low-fee checking accounts are absolutely worth seeking out. If you know your bank has raised fees, ensure your banking habits are not costing you unnecessary charges.

7. Keep an eye on the interest rate

Checking account interest rates range from low to non-existent these days, but if you signed up for an interest-bearing checking account, determine if you are getting the rate you expected. If that rate changes, see if you could get a more competitive rate elsewhere.

8. Be careful with statements and payments

Banking statements contain sensitive information, so do not leave them sitting in your mailbox. Consider destroying or shredding them rather than simply throwing them out.

9. Look over your shoulder in public places

Debit cards require a personal identification number that can be compromised by onlookers. Be aware. Also, do not do your banking on public wireless networks where electronic snoops can steal your information.

10. Report suspicious transactions immediately

Even the best security measures are sometimes thwarted, which goes back to the need to monitor account transactions frequently, so you can quickly report any questionable activity.

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