3 Easy Steps to Take Back Control from Your Bank

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.

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.

2) Stay on top of your accounts. Trust me - it is always less expensive to spend a few minutes each and every day monitoring and managing your accounts then it is facing the high fees and climbing interest should you let the ball drop. Here are some tips:

A) Keep great records and balance your accounts daily. With online account access 24 hours a day - this is as easy as it gets. Don't just look at transactions posted but also look for outstanding checks and charges your bank may not know about yet -termed float. This way you should never be surprised by overdrafts or late payments.

B) Monitor your accounts daily. Thus, if there is a problem - either from your side or the bank's - you can take immediate action before the problem gets out of hand. Much easier to manage a single overdraft then it is to wait and have to manage several. And,

C) understand your responsibilities - this means reading your account agreements and living within the letter of that contract. Your bank understands that very few people take the time to read these statements - in fact they are counting on it. In this case it is OK - even better - to go against the norm and understand the fine print before a problem arises - most people only find out about these stipulations after they are already sunk by them. This leads us to our final tip:

3) Be proactive. As a former commercial lender, the businesses that would call me the first thing in the morning stating that they may have an overdraft or be late on a payment were the only ones that avoided these fees and additional charges. My advice to you is, as soon as you know you will be facing an adverse situation, call your banker or credit card company immediately, explain the issue and present a solution. As a side note: it is much easier for both the user and the banker to stop fees before they get posted than it is in trying to get them reversed on your account. The bank's or credit card company's management do not ever want to give back fees - but your banker or account manger can easily stop them before they happen. Thus, be proactive - show your bank that you are responsible - and work hard to build that relationship with them.

I cannot state this enough - it is just so much easier and less of a headaches on both sides if any and all issues are stop and managed before they become problems. And lastly, don't be afraid to shop around. As businesses grow their needs change. Don't feel you have to use the same financial institution just because you have always been there. If your account is not working for you (i.e. making it hard for you to manage your accounts to your benefit) then shop around. Taking a little time now will really benefit you in the long-run.

Banks have studied user behavior and usually know, down to the person, who will and who will not properly manage their accounts. Thus, they are counting on you to screw up - but, you can change that if you are willing to change your behavior a bit. The goal is simply not to put yourself in a position to be taken advantage of.

Quit being a victim and avoid falling into their statistics - it is really up to you. If you truly think about it - you are their customer - they need you - yet, they always seem to have the power; especially when a problem arises. But, you can take back that power - back where it really belongs - in your hands.

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