Check Up on Your Bank
Know What Records to Keep and Where to Keep Them
Do you read your bank account statements regularly? While Bankrate’s surveys found that 74 percent of Americans do it all the time, more than half do not reconcile their bank statements regularly, if ever. Many people do not even open the envelope with their bank statement inside. Don’t be one of them. Banks frequently make mistakes. It’s your job to catch them.
From what we see at Bankrate, perhaps the biggest problem is that Americans do not think they can negotiate with their banks. Nonsense!
You have a good chance of negotiating no-fee checking, no-fee credit cards, lower credit card interest rates, and a discount on your safe deposit box. Consumer banking has become very competitive in the United States, and the worst thing that can happen for a bank is to lose a good retail customer—it’s anathema to them. Your lifetime value as a customer is significant, and if you threaten to switch banks, often you can get what you want. Get to know your branch manager and start asking for breaks. Plus, your life will be much easier when something goes awry.
Other than not checking bank statements, many Americans make other costly banking boo-boos. Here are some you should avoid:
° Don’t keep more than $100,000 at any one bank. The Federal Deposit Insurance Corporation limits protection to $100,000 per person (not per account as many people believe) at each financial institution where you deal.
° Don’t order checks from your bank. You can get them elsewhere for less. (It’s not necessary to include your address on the check and many experts recommend omitting it as a safety measure to avoid identity theft.)
° Make sure you have enough money in your bank account before you write a check. It’s embarrassing, time-consuming, and costly to bounce a check. Bankrate’s research shows the national average fee for a bounced check came to $25.80 in 2003, with fees going as high as $35! If you have bounced several checks in the past year, look at some form of overdraft protection from your bank.
° Think twice before locking into a five-year CD at a low rate, with- out “laddering” into shorter-term CDs as well. Bankrate.com publishes a CD Rate Trend Index each week summarizing where investment professionals think interest rates are heading and show- ing where the highest CD rates are offered.
° Try to avoid withdrawing money from a bank where you do not have an account. Sure, it’s convenient—but the convenience comes with a price. Bankrate studies show non-bank ATM withdrawals cost an average of $2.69 between the surcharge by ATM owner and the fee charged by your bank. So for a $50 withdrawal, the almost three dollars in fees represents a six percent transaction cost. This for taking money out of your own account!
° Don’t pay a bank for its services. Rather, let them pay you. Add enough to your minimum account balance so that it becomes
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° Make sure your CD is not callable, meaning it can be redeemed anytime the issuer wants. It will not be called if interest rates go up but if the rates drop, the issuer will probably redeem it, leaving you to reinvest when everything else is similarly in the dumps. It’s a heads-I-win/tails-you-lose situation—for the bank.
° Don’t succumb to the lure of “early withdrawal.” Federal law requires a minimum penalty of seven days interest for early with- drawal on any account classified as a time deposit. Since the law does not set a maximum penalty, banks are free to (and usually do) charge much more. Before opening a CD account, find out all the details.
° Don’t put all your eggs in one basket. Unless you’re extraordinar- ily lucky you’ll be taken for a bumpy ride. Rather, allocate your assets. This means divvying up the eggs in your basket so that you spread the risk.
It’s also your job to know where your important papers are and, if you had five minutes to clear out of your house, what you should grab. Here are some tips to help you plan for the unthinkable:
• Identify a single location to file all crucial papers—a fireproof box or safe deposit box.
• Create copies now (certified, in cases of birth certificates and other crucial documents) in case you need to provide them to government agencies.
• Put important original documents in plastic covers to protect them and to prevent you from accidentally giving away the original.
• Tell friends or relatives where important information is located in case you’re not available when it is needed.
• Identify the records that you or your financial institutions keep only on computer. They may not be available if electrical power fails, so make printouts.
• Keep your marriage records, divorce decrees, and birth certifi- cates in a safe deposit box. Keep a record of bank accounts, identi- fication records (driver license, green card, passport, and so on), titles, deeds, registrations for property and vehicles owned, mortgages, and other loan information.
Here are some other things to safeguard:
• Insurance policies
• Investment records
• Credit card statements
• Employer benefit statements
• Income tax information (copies of past returns, proof of estimated tax payments)
• Report of earnings from Social Security
• Social Security card
• Trusts
• Wills
Other precautionary steps:
• It’s a good idea to keep one key to the safe deposit box in the house and one with another person (a relative or lawyer).
• Itemize objects room by room, filling in serial numbers, purchase dates and estimated values.
• Keep backups away from your home and update your computer files regularly, adding these records to your safe deposit box.
• Keep a notebook with contact information for banks and other financial institutions, your employer, insurance agents, and utility companies.