Smart Banking

Banking Considerations

13 ways to make your bank accounts work harder for you

By paying close attention to your bank accounts, you can save more of your hard-earned income and make your savings work harder for you. The considerations below cover how to think about banking relationships, negotiate better terms, and avoid common fees.

1. Why Banks?

Banks exist to provide three basic services: facilitating financial transactions, storing funds for future use, and lending money when you need it. These services can be obtained without a bank — common alternatives include credit unions, suppliers, seller financing, or loans from family or friends.

2. Borrowing Money from a Non-Bank

A bank is often the most difficult place for a loan when you need it. A seller may carry financing on a purchase, or a family member may be willing to lend you money — the way financing was commonly handled before banks became dominant. Non-bank loans can often be arranged at 2–5% less interest than a bank would charge, while still offering the borrower the same legal protections.  

For example, no one would go to their bank for a car loan if the dealer offers 9% financing — but a loan from a family member at 6% may be available. Apply this principle to all purchases involving credit.

3. Leverage Your Relationship

Banks give preferential treatment to accounts that are worth more to them. Ask what breaks your bank will offer if you consolidate your accounts with them — you can often reduce your credit card interest rate by 1–5%, have checking fees waived, and get minimum balance requirements forgiven.

4. Work on Lower Fees

You should always be able to find a truly free checking account — but "free" often depends on using the account the way the bank wants. If you're charged a fee, call and ask the bank to waive some or all of it. They will often agree, especially if you maintain a significant relationship with them.

5. Find No-Fee Credit and Debit Cards

Visa and Mastercard are brands distributed by many different banks and credit unions — a Visa card is a Visa card regardless of issuer. There are numerous places to obtain credit and debit cards without an annual fee or a high interest rate, so shop around.

6. Shop and Negotiate

Almost all banks will negotiate loan rates and fees, but most people are hesitant to negotiate with banks or to cross out unfavorable clauses in loan documents. Always shop two or three lenders for the best rate — and tell each one you're doing so. Use competing offers to get fees reduced or eliminated.

7. Set up accounts with borrowing options Before You Need It

Banks prefer to lend when your financial condition is strong, and are reluctant to lend when you're in real need. The best time to apply for credit is therefore when you need it the least — expand your credit limit when your payment history and income are strongest.

If you have home equity, consider establishing a home equity line while times are good. Unlike a standard loan, a home equity line lets you draw funds only when you need them, similar to a credit card, and the interest is often tax deductible.

8. Avoid ATM Fees

Many banks charge $1–$2 every time you withdraw funds from an ATM outside their network. To avoid this, use a bank with a wide "on-us" ATM network, or one that doesn't charge ATM fees at all.

9. Use Debit Cards Wisely

A debit card carries the Visa or Mastercard logo, but funds are pulled directly from your checking account. Banks favor this product because it turns an expense (processing a check) into revenue (merchant fees on debit transactions).

The risk: many users forget to record debit transactions, leading to overdraft fees. If a debit card is lost or stolen, your checking account can become vulnerable — the account may need to be frozen and closed, with liability of up to $500 in losses. Debit cards are convenient worldwide, but should be used with awareness of these risks.

10. Avoid the Overdraft Checking Trap

Overdraft protection attaches an instant loan to your checking account when the balance hits zero. It's a significant profit center for banks, since most people don't repay the loan immediately, and many banks also charge a separate fee for the protection itself.

Look for a bank or credit union that shifts funds from a linked savings account instead — the forgone interest is typically cheaper than overdraft fees. Or simply repay any overdraft loan immediately.

11. Bank Savings Accounts generally do not pay well

Money market mutual funds almost always offer a better rate of return without significantly more risk. While they aren't FDIC insured, they have existed since the early 1970s with virtually no losses.

12. Understand Bank Fees

Banks increasingly focus on fee income for profitability. Understanding what your bank charges — and when — can help you avoid unnecessary costs. For example, know whether a low-balance fee is based on your average balance over the month (best case) or triggered by dipping below the minimum on even a single day (worst case).

13. Watch for Fees That Generate Fees

Ask whether your bank's fees can compound on themselves. Large auto-leasing companies are a common example: if a payment is processed a day late and you dispute the resulting late fee without paying it, your next statement may show that unpaid late fee generating another late fee — even though your actual payment history is accurate.

Read the fine print on loan agreements, and consider striking or amending language so the lender cannot charge late fees on late fees.

Bottom Line

Banks provide a vital service, but — like any relationship — you can save significant time and money by actively managing it. Shop around, negotiate, ask questions about fees, and don't be afraid to look beyond traditional banks for better terms.