Tuesday, 20 October 2009

• Confessions: The Secrets of a Bank Teller, Part Two

  
  
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  Banks somehow manage to remain a giant mystery to some. Their timing, their reasons, their policies... all often seem to occur without any good reason. We've covered deposits—so now here are the secrets to the other side of the process!
  

  Part II: Withdrawals

  • First and foremost: if you even occasionally forget things, keep a check register! I know most people just use a debit card or cash for everything, but if you covered your share of the utilities with a check, or stuck a $20 check into your little sister's birthday card, or any other instance where you completely spaced writing a check or even hitting the ATM for $40, keep a check register! Banks make a ridiculous amount of profit from overdraft fees—keeping track of every penny that leaves your account is the best way to save yourself that $35 fee! Ok, rant over (for now).
  • Debit Cards: such a convenience, but also the bane of many an unsuspecting customer's existence. Here's why:
  • The Gas Station: Rather than go inside to pay, most people just swipe their cards at the pump. Which is the catch. Swipe your card first, and the bank doesn't initially know how much you paid. Most gas stations only reconcile their credits and debits every two or three days—so fill up on Tuesday, it might be Thursday or Friday before the $40 is actually removed from your account. In the meantime, your bank may do one of two things. (1) It may just hold a dollar as a placeholder. Basically saying, "We know you spent some money, but we don't know how much. Here's a reminder that there's still an outstanding debt out there somewhere," or (2) It may hold a certain dollar amount ($25, $50, even $100 when gas prices were high) as a placeholder. Basically saying, "We don't know how much you spent, but we want the money to be there when the gas station collects, so you can't spend this money until we know for sure." It's wise to know which method your bank uses—if you let your account dip too low, that $1 could be a false sense that you have more money than you do. Or worse, that $50 being held could make the bank think you're about to overdraft when you really only filled $25 worth of gas!
  • The Restaurant: Just like gas stations, if you leave the tip on your credit or debit card receipt, the card is swiped before the full total is figured. So if your meal is $12.50 and you leave a nice $2.50 tip, your online bank screen will only show the $12.50 until the restaurant (again, maybe only every two or three days) reconciles its credits and debits and deducts the tip from your account as well. (Side note: write the tip on the copy of the receipt you keep, and keep the receipt at least until the total amount clears your account. A restaurant I know was notorious for increasing tips by $1 or $2 and hoping no one would notice or bother to dispute it, and bartenders have been known to attempt it, hoping or assuming patrons were too tipsy at the end of the night to remember how much they spent.)
  • Online Purchases: Just a note that these often take FOREVER to clear. Often, a website will wait until your item ships before it will officially authorize the withdrawal from your account. It may sit in your pending transactions for a few days, it may even disappear for a few days, but all of a sudden, 7–10 business days after you bought (and possibly forgot you bought) the item, there goes $14.99+shipping from your account! Another good reason to keep a check register!
  • Automatic Withdrawals
  • Your gym membership, Netflix subscription and who knows what else are probably set up on automatic withdrawal. This is a fabulous time saver and a great way to not have to worry about late fees or completely spacing off making the payment. However, keep track of them! Most come out on a set day every month, so you know they're coming—but are you actually using them? Gyms especially love setting you up on automatic withdrawals for payment—you haven't been to the gym since August, but they make sure you paid for September and October, too! If you use the services you pay for, great! If not, cancel the automatic withdrawal. You do have to do this through the facility itself, though—the bank can stop a payment from being withdrawn, but there is usually a fee attached to it!
  • The Order of Business
  • In the wee hours of the morning, when your bank is crediting your account with your deposits and debiting your account for your withdrawals, it doesn't matter in what order you made your purchases. If your balance is running low, and you thought you'd spend a few dollars here, a few dollars there, and probably overdraft only once if your rent check came through tonight, you're in trouble. Banks almost universally debit your account in order from largest dollar amount to smallest. Their reasoning is that your largest withdrawals are for things like mortgage or rent, car payments, credit card payments, etc.—i.e. things that would damage your credit if the check bounced. The $5 you spent at Burger King or the $10 you spent at Wal-Mart won't make or break your credit score, so those get tacked on at the end. What that means for you if you overdraft is a LOT of overdraft fees. Many banks charge you every single time you use your card once you're negative—so two McChickens from McDonald's could cost you almost $40 if you overdraft on those two dollars!
  • Overdraft Protection
  • Speaking of overdrafts, let’s talk about Overdraft Protection. Two words: Get it! Most banks have the ability to link a savings account or credit card up to your checking account. Rather than charge you astronomical fees every single time you overdraft, they charge one transfer fee (very often less than half an actual overdraft fee) to bring money from the credit card or savings account to your checking account to cover the amount you go negative. If your overdraft protection is a credit card, you’ll want to pay off the balance before you accrue any interest, but overall, there’s no reason NOT to have overdraft protection. Even if you think you’ll never overdraft, life happens. Better to have it and never use it than not have it and realize you need it!
  • Foreign Purchases
  • At some point, you may be headed to a foreign country. Whether you’re headed to Mexico for spring break, backpacking through Europe or cruising the Caribbean, you’ll find yourself spending money. Many popular tourist destinations will take American dollars, and others will accept your Visa or MasterCard branded debit card or credit card. There are a few things to know, however. (1) Tell your bank what your travel plans are. Call the number on the back of any card you plan to use, so they can make a note on your account that your spending pattern will change. When a bank sees a number of unusual transactions (i.e., you live in Chicago and suddenly transactions are appearing from Paris), the bank tends to think your identity has been stolen and freezes the card for your protection—and theirs. Since you’re all the way in Paris, it may take several days to express ship a new card to you, leaving you stranded! (2) Know that it takes a few days to more than a week before those charges will actually be pulled from your account. Again, this is a great time to use your check register! Don’t rely on your online banking for your actual balance—the lag time and/or currency conversion procedure may make your balance look a little screwy, and it might not be until you’re back home that you realize you spent way more than you had! (3) Know that almost every card, credit or debit, charges a currency conversion fee. Sometimes it’s a flat rate, but most often it’s a percentage of the sale. Credit or debit cards are still more secure than cash, but if you’re pinching pennies, carrying around the local currency is less expensive than charging everything.

  Stay tuned... Part III we'll talk loans!
  

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