In order to minimise costs and make your life easier, it is well worth checking over how your accounts are set up and having a look at other services available through online banking. Here are a few things to consider to make your banking better.
Check your accounts
These accounts should be your "busy" accounts, where money frequently flows in and out. They typically have low transaction fees but low interest. Things to look out for:
If you have more cash in your on-call accounts than is needed for spending each month, transfer the surplus to a higher interest account or investment
Check if you have an overdraft set up and cancel if it is not needed
While most accounts do not charge for online transactions, many do charge "manual transaction" fees if you visit your branch
You will save money by doing the majority of your banking online with the appropriate account. However, if you prefer to visit your local branch, consider an account which charges less for manual transactions.
Savings accounts are great for short-term goals or keeping an emergency fund. The interest rates are higher than on-call accounts but with penalties for transactions.
If you have much more in your savings than you will realistically need for your short-term goals plus an emergency, consider shifting the extra to a better investment
Check whether you are incurring costs or forgoing interest with frequent transactions. If so, consider keeping more cash in on-call accounts for these withdrawals
Compare interest rates between different account types for the amount you are saving and the time-frame
For your savings account, make sure you are limiting withdrawals. Also, instead of making payments from this account, it is usually better to first transfer to your on-call account to reduce fees paid.
Having a credit card is great for regular spending, if you are disciplined in paying the full balance each month. When choosing a card, consider the benefits against the costs.
Consider how much you spend each month and compare the expected rewards earned to the fees paid
Choose a sensible credit limit based on your monthly spending
Pay your balance! The interest on credit cards is extortionate. It is better to transfer from other accounts onto your balance than let interest accrue on the card
If you find yourself unable to pay the full balance at the end of each month, a debit card may be preferable. Debit cards work in the same way as credit cards, but you can only access your own money instead of credit from the bank. Your credit limit can also be used as a rough budget for monthly spending.
Automate your finances!
Automatic bill payments
Setting up automatic payments for your insurance, utilities and other regular payments is easy with online banking. Not only will you never miss a payment, but many companies offer discounts for automatic payments! Power companies offer a prompt payment discount as high as 20% for paying on time, which you will never miss with an automatic payment.
Automatic payments help you stay on budget
As most banks do not charge fees for transferring between accounts, automatic payments can be great for budgeting. Here are some ways you can set up your automatic transfers to pay yourself first:
Set up a transfer on payday to your savings account(s) to make saving for a holiday easier
Automatically transfer from your regular account to a designated on-call spending account to better track your spending
Set up a regular transfer to your investment accounts to maintain discipline and benefit from dollar-cost averaging
Most importantly, set up your accounts and payments to work for you. Some of the strategies I've come across are:
Setting up payments to a spending account to budget better, anything left over is savings.
A friend of mine has a savings account with a separate bank, with automatic payments each payday. The one day delay dissuades him from dipping into his savings.
Another friend has separate accounts and automatic transfers for utilities, regular expenses and "luxury" spending, to help track his spending habits.
There are fees and costs you may not realise you are paying or are not getting value from. Keep an eye out for:
Paper fees - Most banks now charge a fee for posting bank statements. Go paperless, receive statements via email and save yourself the cost.
Manual transaction fees - If you are frequently paying fees for payments and withdrawals, consider changing your account types or changing the way you move money around
Overdraft fees - You may be paying for overdraft facitilities you don't need. If you never go into overdraft, consider cancelling this service
Interest payments - If you find you are paying interest on your credit cards or overdraft, pay down your debts where possible. Otherwise, focus payments on high interest debt
Other account fees - As described above, there may be different account types that save you money
Most importantly, check your monthly statement! Even if you don't get around to it every month, you will often pick up on fees you didn't realise you were paying, subscriptions you don't use and spending habits you might have missed. Many free trials require you to enter your card details (Neon TV and Spotify come to mind) and start charging you when the trial ends.
Useful banking tools
If you don't like budgeting, you can still glean useful information from basic tools on your online banking login. For example, with ASB's "Track My Spending" option, just choose the account(s) you want to look at and you will get a summary of total income and total spending each month for the past year. You can easily see your average monthly income/spending and whether you are running a surplus or deficit. Most banks will also have the option to "code" past transactions into categories, so you can also look at how much you spent on different areas, such as utilities or eating out.
Budgeting and net worth
If you want to take a deeper dive into budgeting, there are work sheets where you can estimate your monthly spending in different categories. Also, you can track your assets and liabilities to estimate your net wealth. While understanding your net incomes vs net spending helps for planning ahead, having a budget helps identify and manage bad spending habits to save you money.
Save the change
A new feature offered by many banks is "Save the Change", where purchases are rounded up to the nearest $1 or $10 and the extra is transferred directly to your savings account. It works in the same way as a digital piggy bank. This is a great way to squirrel away a bit of savings each time you spend.