Lifestyle Choices Secretly Draining Your Bank Account
With all of the demands and distractions life serves up, it’s no wonder you don’t always know what’s going on in your bank account. The problem is that being too hands-off can cost you some serious cash, month after month and year after year.
The worst part? All of these choices are completely avoidable.
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Here are behaviors to avoid at all costs for your own financial well-being.
Carrying High-Interest Debt While Savings Earn Almost Nothing
Cody Schuiteboer, president and CEO of Best Interest Financial, said that people often carry credit card debt with interest rates as high as 24%. He added that, at the same time, their savings earn close to nothing, typically 0.01%.
He pointed out that this choice is a huge waste of money and the calculations are quite straightforward.
“A $5,000 credit card debt with 21% rate results in about $1,050 interest payments per year,” he explained. “A customer may have a similar amount of money in a regular savings account, generating nothing. It's clear that it makes much more sense to deal with debt first.”
He said that one client was paying more than $183 in credit card interest each month. However, refinancing the debt and moving an emergency fund to a high-yield account helped him free up more than $2,000 a year.
Once the credit card debt is paid off, Schuiteboer recommended opening a high-yield savings account with an annual return of 4%-5% to start earning money on your banked cash.
Paying for Subscriptions You May No Longer Use
Schuiteboer said that another lifestyle choice that secretly drains your bank account is subscribing to various online products and services. He explained that streaming services, gym memberships and free trials that turn into paid subscriptions can add up fast.
“On average, an American holds four to five subscriptions he or she hasn't been using for a year,” he said. “Every subscription is charged monthly and costs approximately $15-$30. This means that in a year, you will lose somewhere around $180-$360.”
He pointed out that one client found seven useless subscriptions totaling $156 per month. Schuiteboer recommended checking your bank statements each quarter and removing any subscriptions to services and products you are not using.
Paying Unnecessary Bank Fees
Where you bank matters for your bank account.
Prisca Benson, money coach and the founder of Our Green Life, said that some banks charge customers a monthly fee just to keep an account open, but that this fee is unnecessary.
According to MoneyRates, the average monthly maintenance fee for bank accounts is $13.51. That’s $162.12 in annual banking fees you could avoid.
“There are plenty of banks that will allow you to bank for free, especially if you have direct deposit set up,” Benson said.
Paying Unnecessary ATM Fees
According to Benson, withdrawing cash from the nearest ATM as a convenience can easily cost you $4-$5 per transaction. If you pay that fee once a week, it adds up to $16-$20 per month or $192-$240 per year.
However, it’s unrealistic to think you’re always going to be near an ATM served by your bank. The solution is to open an account at a bank that reimburses you for ATM fees, said Benson. She added that some online banks offer this service, but it’s possible that some brick-and-mortar institutions do too.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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