3 Easy Steps to Take Back Control from Your Bank
by Business Money Today - September 12, 2009
Banks these days have a very bad reputation. The mismanagement and greed during the subprime housing bubble and the ensuing bailouts, growing user fees that wipe out checking and savings accounts and huge interest rates and fees for credit products (mostly on business credit cards and lines of credit) - has really made these organizations out to be the villains.
However, you do not have to be a victim of your bank anymore. The majority of the problems that businesses (or even individuals) face with their banks stems from the users mismanagement of their accounts. Late payments and overdrafts can really eat up a business's cash and profits. Regarding overdrafts - most banks will pay large items first. They state that large items (checks and drafts) are usually the most important - like term loan payments or employee payroll. But, this usually means that all the following (littler) items will bounce. Now, we all know the true reason they pay large items first - since they charge an overdraft fee per item, the more items they can get to return - the more fees they realize.
If you know and understand this - you can better mange or mitigate it. Regarding rising interest rates - most rates trigger during an event. Low introductory rates ratchet up in either 3, 6 or 12 months from account opening or when a payment is late (even one second late). Know this and better mange for it.
You do have the power to avoid all of these soaring fees and high interest. The following are a few simple methods that you can employ right now that will better position you and your company to take back control of your financial health.
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1) Don't mismanage your accounts. Most financial institutions set fees if and when the account holder does something in opposition to the account agreement. If your account agreement states that the bank will pay your overdraft and charge you a fee - then don't allow any overdrafts - thus, they cannot charge you a fee.
If your agreement states that your payment must be made by 9:00am on the 15th - get that payment there by 9:00am on the 15th - given electronic payment methods or even online transfers or pay by phone - you should never, ever be late on a payment. Pay your revolving credit off each month - this way you avoid any interest charges all together. If this is followed, your interest could rise to 100% compounded daily - and you still will not be affected.
Use revolving debt like it should be used - as very short-term cash flow management. Make the transaction now when you need to - but know that funds to cover those transactions will materialize before the due date. Anything else (in regards to credit cards or lines of credit) is simply a mismanagement of those accounts - i.e. they are not meant to be long-term financing vehicles.
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3 Easy Steps to Take Back Control from Your Bank - Business Money Today