By William J. Lynott
Identity thieves and scam artists are lurking everywhere these days, and businesses that are careless with banking documents are one of their favorite targets.
Your bank may not be the scoundrel that some would have you believe, but don’t mistake it for your kindly old uncle either. Banks are in business to make money just as you are, and today’s tough economy is causing banks to look for ways to take a bigger bite than ever out of your bottom line. What’s worse, the bad guys, like identity thieves, are an even bigger threat than banks to your financial well being.
Here are 10 costly banking errors and how to keep them from chipping away at your net income:
1. Failing to steer clear of those new and increasingly oppressive bank charges
You’re not the only one feeling a chipping away at your bottom line these days; your bank is dealing with the same tough economy.
One of the techniques most banks are using to beef up their bottom lines are increased service charges. The average ATM service charge — the fee charged by the machine’s owner to a non-customer — has risen to record highs for the seventh consecutive year. In addition, overdraft fees brought in nearly $30 billion in 2012 according to a report from Pew Charitable Trusts. That’s up from $10.3 billion in 2004. According to a report from the Consumer Financial Protection Bureau, overdraft penalties now represent over half of banks’ fees from consumer checking accounts.
If you allow yourself to get careless and bounce a check, you’ll likely get hit with an oppressive overdraft fee, one of their most profitable ploys. Many banks now automatically enroll their checking account customers in an overdraft program that allows them to hit you with an overdraft charge of as much as $35 every time you write a check for more than your account balance.
2. Failing to monitor your bank statement closely
Those monthly bank statements may not make for exciting reading, but they could make for profitable reading. Banks can and do make mistakes, so you or your accountant need to make sure that you’re not being hit with incorrect charges, especially in this age of new and unfamiliar charges. It will only take a few minutes to examine each entry on your monthly statement.
3. Leaving an inviting paper trail
Identity thieves and scam artists are lurking everywhere these days, and businesses that are careless with banking documents are one of their favorite targets. Leaving old bank statements, voided checks, or other banking documents where others may find them makes your business an easy target for the bad guys.
Every one of your old or discarded bank documents should be torn into small pieces or, preferably, shredded. Office shredders are now inexpensive enough to make them a wise investment for owners of even the smallest businesses.
4. Using a weak online password
Online banking is so convenient and easy these days that an increasing number of businesses and consumers (54%) now prefer the speed and convenience of conducting their banking transactions on the Internet rather than visiting their local branch, according to a survey by Pew Research Center.
The preference for online banking was followed by visiting branches (21%), and using ATMs (17%) according to the American Bankers Association.
While experts agree that online banking is as safe, perhaps even safer, than conventional banking, it’s important not to be complacent about your online password. Resist the temptation to use something as simple as your birth date. Use a combination of letters and numbers chosen at random, and never do your online banking from a public computer.
5. Making deposits directly into your checking account
While the interest rate on virtually all banking accounts is sickly these days, it’s virtually non-existent on business checking accounts. That’s why you should never make your deposits into your checking account. Instead, open up a money market account at your bank and ask to have it linked to your checking account. Then make all of your deposits into the money market account where your money will draw a better interest rate (rates will likely be going up soon, making this step even more worthwhile).
Then, transfer money from your money market account to your checking account online or by phone as needed to cover checks written.
6. Overlooking the dangers of ATMs
Crimes involving users of ATMs are growing nationwide. When you use your ATM, it’s important to take basic precautions to protect yourself and your money. Keep yourself aware of persons around you, and make sure that you shield your PIN number when you’re typing it in.
Once you’ve made a withdrawal, put your money safely away before you walk to your car, and double check to make sure you have your card with you. The chances of being robbed at an ATM may seem slight, but it can and does happen.
7. Failing to check with other banks for the best interest rate if you need a loan
When you need a business loan, it’s only natural to look first to the bank where you do your regular banking, but you shouldn’t stop there. The banking industry has become very competitive in these difficult times. The result is a wide variance in such things as interest rates on loans. Always shop around for the best interest rate; there are many other places, especially online, that offer attractive deals whether you are saving or borrowing.
8. Opting out of paper statements
You’ve probably noticed those inviting suggestions from your bank that you opt-out of receiving paper statements each month. It’s a good idea for the bank because it saves them time and money, but it’s not necessarily a good idea for you and your business.
It’s much easier to spot irregularities when you examine your paper statement each month than it would be on a Web page. Even if your bank charges you a few cents for paper statements, it probably would be best not to opt out. Failing to carefully examine paper statements each month is one of the most common and potentially costly banking mistakes.
9. Failing to recognize “phishing” e-mails
Every day, scammers send millions of authentic-looking e-mails asking the recipients to provide sensitive business or personal information. On the pretext of being from a legitimate company or bank, the message will often instruct the recipients to click on a link that sends them to a fake website. These fraudulent sites will ask for information such as name, address, phone number, date of birth, social security number, and bank or credit card account numbers.
Never, never provide such personal information in response to an e-mail, no matter how authentic it may appear. Legitimate companies and banks will never ask you to provide that kind of critically important information in response to an e-mail.
10. Failing to develop a personal relationship with your branch manager
If you want to be sure that you’re getting the most favorable treatment from your bank, it’s important to establish a personal relationship.
Don’t hesitate to ask for a meeting with your local branch manager to introduce yourself. Tell the manager a little about yourself and your business. When it comes to straightening out a problem or asking for a loan or other help, there’s no substitute for being personally acquainted with the powers that be.
Banking is a tricky and complex business these days. As a business customer, you need to keep yourself up-to-date on the most current banking practices. Following these suggestions will give you a head start on maximizing the financial potential of your home-based business. HBM
William J. Lynott is a veteran freelance writer who specializes in business management as well as personal and business finance. His work appears regularly in leading trade publications and newspapers as well as consumer magazines including Reader's Digest, AARP Bulletin, and Family Circle. For samples of his work and more information about Bill, log on to his web site: www.blynott.com