Simplify Your Financial System

Phil Villarreal’s article earlier this week highlighted some of the new bank fees we’re likely to see now that new legislation has taken full effect. If you’re affected by any of these new fees, it’s about time that you take a look at simplifying and optimizing your banking system.

Banks are instituting these new fees because of their sacred cash cows, the overdraft fee, has been taken to the slaughterhouse. In response, they’re trying to turn a profit on the accounts that, without this fee, would be unprofitable. That’s why they’re introducing annual fees, low activity fees, and other fees that affect their least active customers. If you have a bunch of these low activity accounts and anticipate new fees, now’s a good time to simplify your financial network.

The first step is to draw your financial network map. It’s a map that illustrates all of your financial accounts, like checking accounts, credit cards, and brokerage accounts; and how they are interconnected. This is a crucial step in understanding what you can consolidate and what you can cancel.

Next, list any new fees on those accounts, marking them in red. You want to look for maintenance fees, low activity fees, and any other fees you’re likely to be assessed. Be honest, if you get dinged a late payment fee once a year, put that down too. This will give you an idea of which accounts you should consider trimming first.

Start paring off accounts you no longer need. For years I kept a checking account in Pittsburgh, I went to college. When they raised the minimum balance required to avoid a monthly maintenance fee, I withdrew the remainder of my balance. I hadn’t closed it earlier because I was lazy, the new fee gave me the incentive to start cleaning it up.

In general, you should stick with a minimum of one checking account, with convenient ATM access, and one savings account. I have a special place in my heart for high yield savings accounts, which generally have low minimums and no fees, but that isn’t required. If you like credit cards, try to stick with fewer than two or three (though you can keep them open if there are no associated fees), otherwise you will be OK with only a debit card.

Jim writes about personal finance at Bargaineering.com.

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  1. sleze69 says:

    It’s funny. You would think that the idle money I have in my savings account would benefit the banks as they can invest it and make a greater profit than the 1% or so interest they give me.

    If any of my banks try to rip me off with idle fees, they will have to process exactly one more transaction – a closeout withdrawal.

    • johnva says:

      Why care about attracting deposits when you as the bank can just get basically interest-free loans from the Fed? They can get all the capital they want that way, without having to invest in things like paying decent deposit rates or pesky expense expenses like decent customer service.

    • Hoss says:

      Our deposit is only a fraction of the funds the banks loan The larger piece is borrowed funds which are cheaper to acquire and maintain.

      • johnva says:

        Exactly. Our financial system is now more based on “investment banking” than anything remotely resembling something out of “It’s a Wonderful Life”. Banks don’t actually care much about their “small” customers any more, because they can raise capital in other ways that don’t require the expensive catering to a lot of individual people or communities. That’s why a lot of the business model for retail banking has become so oriented around fee income rather than customer service, attracting deposits, etc, and why you saw such a freakout from the banks when new regulations were enacted that might cut into that fee income. Without the fee income, they might not even care at all to be in the business of serving less-than-wealthy individuals.

    • peebozi says:

      they loan 20-30x’s your deposit…it’s how they create something from nothing. and produce nothing.

  2. BadgerPudding says:

    It’s sad how banks are acting like bratty kids after Obama and the dems forced them to clean their room. Maybe it’s time to pass even more reform.

    • Hoss says:

      Banks don’t make shareholders happy be doing community service. If you want a financial institution like that, they are organized as a credit union

    • ishootfriendlies says:

      Great point! I think banking should be a “Human Right” like health care. Then, we can insist the banks do not make a profit. They just have to be in business to make people smile. Then, when it comes time to pay their employees, they can pay them in smiles instead of money because, after all, only evil corporations try to make a profit.

      • BadgerPudding says:

        Obama derangement syndrome much?

      • JMILLER says:

        Actually, if the banking were more nationalized, the economy would not have tanked the way it did. Canada is not suffering from these problems because there are very few banks with HUGE regulations on what they can and can not do. I’d prefer there be one bank period. Not run for profit, and it would stop a lot of the bullshit that goes on at every level.

        • jamar0303 says:

          But on the other hand, you have Hong Kong with an absurdly high concentration of financial institutions, yet they’ve barely felt it. Though I imagine the connection to China helps in that regard…

      • beoba says:

        thank you for illustrating the OP’s point about ‘bratty kids’

      • peebozi says:

        i wouldn’t have an argument with your position except we don’t operate in a free market economy. so why should we let those who write the laws (the banks) dictate the laws?

  3. LACubsFan says:

    You think THIS is bad now? Wait until those “great” credit card reforms push through. The banks and credit are going to lose money that they used to get from merchants and they are gonna take it out on us. Get ready for fees to take money from any ATM including your own banks, get ready for fees to speak to a live teller on the phone as well. You like your credit card cash back and frequent flier miles? You can kiss those programs goodbye too. Oh… and get ready for annual fees on all credit cards.

    Thanks Democrats!

    • Travtastic says:

      Way to misplace blame there, boss. “Don’t piss off the rich, or they’ll screw with us even more!”

    • dg says:

      When I was in college – the local bank (*cough*citizens National*cough*) charged an annual fee for college kid accounts, and they also charged everyone a per withdrawal transaction fee at the ATM…

      My solutions? Get a PO Box – told them I was a townie, avoided the “college kid” fee. And when I’d make a withdrawal at the ATM, I’d just take out MORE than I needed right then, so I could avoid the fees…

      The bank would bitch and moan about college kids not keeping a lot of money in the bank… Ummm, you had us for 4-10 years (depending on the degrees worked on), and they were one of two banks, so they got a pissload of deposits… Plus, they handled all the credit card processing in town for just about everyone, and they did the money for the university (cash/check processing) so they were just a bunch of greedy assholes…

      I got sick of dealing with them and the bogus check ID requirements in town, so I eventually got rid of the account and carried cash…

      • SadafImp says:

        Didn’t your PO Box cost more than you made up for in fees? They can be over $100 per year depending on where you are.

    • kiltman says:

      In the end, this should be a good thing. How many people withdraw money from a non network ATM and don’t care about the extra fees? Probably alot because they still do it. As long as the fees flow the banks don’t care where they are coming from. For years they took advantage of those that couldn’t fight back. Now, they have to go after those who can afford to fight back but probably won’t because it is only $5 here and $5 there. I switched to a CU a year ago and am glad I left Chase behind. I have no fees on my purchases and I can find “any” CU around when I need cash, not just my particular CU. But I still use CapitalOne CC when I travel internationally because they do not charge a fee.

    • ss60 says:

      seriously? oh no, the credit card companies have to go back to a more fair pricing structure, even though credit card companies did well before they find all these neat new ways to screw people over now suddenly those same methods won’t work anymore…..?

      The credit card reform act is quite tame and what it does are things that are just evil.

    • LACubsFan says:

      Woah woah woah…. I’m talking about the DURBIN AMMENDMENT part of the financial reform law. The law that limits interchange fees. THATS whats gonna screw over consumers.

      • jamar0303 says:

        Only because the banks make it so. Interchange fees are so low in certain countries that I can swipe my card for less than US$.50 and no one will bat an eye. And yet some stores in the US have “minimum spending” requirements of 10-20x that.

    • FrugalFreak says:

      good time to make the nation a savings=spending nation again. I am so happy I’ve shredded the credit industry years ago! not having to rely on an industry to survive=WIN.
      Simple math

      if you ain’t got money in savings, you don’t need it!

  4. RandomHookup says:

    For years I kept a checking account in Pittsburgh, I went to college.

    Every time someone writes an incoherent sentence, God molests a panda.

  5. f5alcon says:

    The card act hurts responsible people, who don’t carry a balance put protects those who do, which is the majority of people. This however protects those who overdraft and hurts those who dont which is the opposite, most people are not over drawing their accounts.

    • johnva says:

      Actually it’s the banks’ business model that does all that. Blaming new government regulations for how the banks might react is misplaced.

      I’m also not convinced that the CARD Act and so on will actually hurt responsible people all that much. It hasn’t hurt me yet, for the most part.

    • kiltman says:

      Then move your banking elsewhere!

  6. speedwell (propagandist and secular snarkist) says:

    Everyone here says people should bank either with a credit union or with USAA. I do both as of last week. Seriously.

    I wanted to let everyone know that you no longer have to “qualify” to bank with USAA. You can’t get other services through them, like auto insurance, unless you qualify, but banking is wide open. I’m really happy with the way they treated me when I opened the account, how they fixed a typo I found when I was looking it over, and the lack of oddball fees (including 6 free non-USAA ATM transactions a month).

    I was looking at their site, at the “free” overdraft protection, the kind that ties the checking to the savings account, and I was unable to tell whether it was really “free” or whether they, as some banks do, charge an NSF fee per occurrence. Anyone with a USAA account know this?

    By the way, so long as we’re talking about panda molestation, why is it “checking” and “savings” instead of “checking” and “saving”?

    • tbax929 says:

      I’ve only used the overdraft once with USAA and was not charged for it.

    • psiphiorg says:

      Probably the same reason it’s “math” and “sports” in the US, but “maths” and “sport” in the UK. I’m not sure what that reason is, but it’s probably the same one.

    • sponica says:

      I think it depends on which account the overdraft is tied to. Unless they’ve changed things you can’t have your savings acct be the overdraft acct on the checking, so you have to tie it to the credit card. Which gets considered to be a cash advance, and can only be done in multiples of 100.

      That’s why i mentally deduct 100 dollars from my checking acct balance. There’s always an invisible cushion.

    • tehbob says:

      The only bad thing about USAA is that their savings accounts have exteremly low intreast rates, however i dont put money into a savings account to invest so its not a big deal for me.

  7. savashley says:

    Okay, here’s an idea, people. Know how much is in your account before you write a check or use your card. Then there would be no worries with these overdraft fees, and we wouldn’t have to opt-in or -out. Too late now, of course, but I have never understood how someone could overdraft their account. On the other side of the card, yes, overdraft fees were incredibly ridiculous, overdrafting $5 and paying an extra $60 in fees is incredibly ridiculous and banks shouldn’t have gone that far with it, but people should KNOW what is in their accounts!

    • tbax929 says:

      That can often be easier said than done. Banks routinely do not update your balance immediately, so a transaction may take a week to show up. What it means is that folks need to keep better records of what they’ve actually spent. I think with the advent of check cards, it’s easier to forget a few purchases here and there.

      I’m a fan of using a credit card throughout the month and paying it off each month.

    • JMILLER says:

      So if a gas station “holds” $50 when you purchase $20, and that causes your next transaction to use “unavailable funds” it is an overdraft fee. Maybe you live in a fairy tale world where every person has the ability to have a large reserve of money “just in case”. BUT many poor people live paycheck to paycheck.
      I’d also suggest you look at how many articles there are on this site of a ban fucking up, and the cascade effect that has on a persons financial situation. Chase freezing and account. BOA not depositing into the correct account. Charter One taking money from a closed account.
      You expect people to be perfect, but you accept the banks and their failures. Go away

      • psiphiorg says:

        I’ve been to gas stations in at least 12 different states, and never once did they put a hold of more than $1 on my account when I used pay-at-the-pump. Where are these gas stations that hold $50 (or even $75, as I’ve seen mentioned elsewhere)?

        • Not Given says:

          Are you using credit or debit and are you closely watching your account online every time? The $75 hold just started recently here, first at one place, then at every one i’ve tried. I might not have noticed for a while if I wasn’t watching so closely. We’re using a local bank debit card as credit for gas, I don’t know if it’s different for credit card transactions.

      • Not Given says:

        Try a $75 hold on checking. It isn’t so bad when DH gets gas, he usually buys $60+ at a time. I have been known to pay cash up front for $20 worth of gas rather than let them hold $75 for filling a tank that wouldn’t hold half that if it was dry. Most of the ones around here used to hold $1 until the transaction went through, suddenly it’s $75? Is this because of some kind of reform? When I go to Sam’s in another town they seem to still be holding $1, at least for members. I always try to fill up when I’m there. The last time, with the 5¢ discount, it was 11¢/gal less than the lowest price in my town, anyway.

    • speedwell (propagandist and secular snarkist) says:

      I haven’t overdrawn my account in 15 years, but there is always that unexpected time. I just don’t want “protection” to kick in when it is more like a “protection racket.”

    • speedwell (propagandist and secular snarkist) says:

      Didactic point of usage: You “overdraw” (not “overdraft”) your account. You would use cash instead of a check if you are afraid of “overdrawing” (not “overdrafting”) your account. You are “overdrawn” (not “overdrafted”). When you overdraw your account, your bank says you have an “overdraft” and you are in an “overdrawn” condition.

      Blame the English language, not me. I’m just your friendly neighborhood copyeditor…

      • savashley says:

        Apologies..my first language is Spanish. Sorry to have so horribly offended you with my grammar.

        • jamar0303 says:

          And where on earth did you read any offense in that comment? Correcting someone is not the same as being offended.

    • Conformist138 says:

      I agree with you in theory, but how many people have forgotten about some $20 check they gave cousin Sally on her 10th birthday? Sally loses it in her room and cashes it in time for her 11th, surprise!

      For those of us forced to live paycheck-to-paycheck, one small little thing can cause a nightmare. And, when banks would rearrange pending transactions specifically to trigger extra windfalls for themselves, then it got absurd. After all the extra fees, I once wound up without enough money the next month, but didn’t want to give up my perfect payment history on my student loans. I had to take ANOTHER overdraft fee just because the bank had taken so many before that my money for bills was gone (and, at the time, I just had too much pride to ask someone to loan me the money, it was embarrassing).

      So, overdraft fees often hurt the poorest people since a smaller fee equals a larger percentage of their overall cash flow. Often the initial trigger is their fault, like anyone else who makes an accounting mistake, but the resulting cycle of fees is the predatory aspect that traps less fortunate people.

  8. ishootfriendlies says:

    Isn’t it great when the government protects us from “Big Business”? Prior to “financial reform”, my 4 checking and 3 savings accounts were free, as were my numerous credit cards (I own a couple businesses) . If I overdrew the account (Which I might have done once every three years) I paid $29 dollars. Now that I have been “protected”, I have to pay a fee for each account. Those fees can easily total hundreds each year, instead of the $10 I was averaging. Thanks Uncle Sam! Another job well done!

    • JMILLER says:

      No you don’t. You could find a bank that does not charge the fee. The banks made the choice to charge you. There is NO provision in the law that says a bank must charge you for an account. They did that on their own.

    • ss60 says:

      switch banks, you are choosing to be screwed by an incompetent bank

  9. newfenoix says:

    Big bank exec to his mistress….”Barbie, I’m sorry I can’t afford to buy you a new Bentley this year because those damn customers won’t let us steal their money anymore. They don’t understand that we have a standard of living to maintain and this is keeping us from living the life style that we should have. They are so evil and cruel for wanting to keep their money.

  10. smo0 says:

    Out of all of this; the worst outcome …
    (and I’m not advocating – because I’ve pointed out the evils of credit unions , but it is STILL the lesser of the two evils )
    bank with a credit union, carry cash, toss the credit card… I’ve managed to survive without a credit card but I am plastic-minded… if they increase the rates we’re going to see more merchants with that “must buy a min of $XX.XX to user debit/credit.”

    Think about this – they are closing accounts with no profitability or increasing fees… just close out, move on – cash only. I manage my money better with dollars in hand… I tend to keep low cash because I’m at a higher risk to lose it – I don’t own a car. I walk and take the bus everywhere….

    any forms of a “boycott” are a reform of their own…

    • jamar0303 says:

      Personally, I’d go with a bank tied to a larger overseas entity, particularly a Chinese one. Those don’t seem to be out to screw you quite the way the local national players are.
      And as for credit cards, my primary spending is on a Chinese one I got. Those are rather tightly regulated so I know what I’m getting into, what the daily interest rate past the interest-free period is (0.05%), and I’m building a local credit record. And no int’l transaction fees. Yes, I have an American Amex too. I try to keep spending on that one to a minimum for good reasons.

  11. NumberSix says:

    My finances fit on a post-it every pay day.