Monday, June 20, 2011

Being Poor With Flair: Taking Responsibility for Your Bank Account

I'll be covering each of the 5 points raised in the Cracked article by John Cheese at some point over the next few weeks. Since it's "responsibility week" (I've decided to do theme weeks on this project), I thought I'd address the author's first point.

Now first off, each of his points is, in its own way, absolutely correct. I don't disagree with a single thing he's said in the article. However, there are coping strategies that can be learned to deal with the drawbacks of being poor, and that's what I'm going to blog about.

So, the bank is out to get your money.

Of course it's out to get your money. That's what "profit" is--the differences between what the customer pays for services and what the service provider has to pay to provide them. It's the capitalist way, and if it weren't for profit, there wouldn't be any banks, or stores, or farms or ... Well, pretty much anything. We'd be doing every thing ourselves, and we'd all be poor.

Now, we need to look at just exactly what this $35 (or $40 if you use my bank) fee is. It really isn't a charge for you to use your own money. (Not that there aren't such charges. It's just that this isn't one of them.) What it's called by my bank is an Insufficient Funds Fee, or NSF fee. The bank is charging you because you did not have any money to use, and you tried to use it anyway.

Let me be quite clear on this one: It's entirely your fault, unless the bank has made a calculation error or one of your creditors took out money when they shouldn't have. In my experience, this rarely happens. Mostly, it's me losing track of what needs to be in the bank at any given time in order for the debits not to bounce back and bitch-slap me in the face.

The good news: Because it's our fault, we can fix it. And without too much trouble really.

Most advisors will tell you that the way to stop this sort of nonsense from happening is to have a "cushion" of one to three months expenses in the bank. When you've stopped rolling around on the floor and crying or laughing (whichever you prefer), I'll tell you a few steps that will come close to eliminating the problem once and for all, and are not entirely unrealistic for someone living paycheque to paycheque.

First, get yourself a calendar from the dollar store, or print one off on your computer. The calendar should have one page per month (so you can see the whole month at a glance), and squares that are big enough to write in.

Write in all automatic monthly or weekly or bi-weekly payments, and put a red "P" or whatever on each payday. Also write in any post-dated cheques you've written (not that you SHOULD write post-dated cheques, because apparently in Canada at least, they're against the law, but again, we're living in the real world here...). Also any other cheques you've written, especially to someone who's notoriously bad at cashing them. (But for those guys, I'd try to arrange paying in cash, first.)

That way, you're not relying solely on your memory to remind you that hydro comes out on the fifteenth and that collection agency payment comes out on the first Friday of the month.

Second, get a bank account where you can check your balance on line. Check the balance daily, preferrably before you leave home for the first time that day.

If you can't do that, be very, very meticulous about keeping track of cheques and debits and automatic payments and cash withdrawls and bank fees and...

Personally, if I didn't have online access to my bank account, I'd switch banks. It's not worth the headache.

Third, once you've checked your balance for the day, subtract from it any payments scheduled to come out before payday, and any cheques you've written. That's the amount you have to play with.

If you can, take that money out in cash, put it in your wallet, and pay cash for everything. Leave the debit card, and especially the chequebook, at home.

Yes, I know Mr. Cheese said that some businesses no longer take cash, but the last time I checked, those businesses did not include variety stores, fast food places, or gas bars.

I would only use my debit card if a) you are really good at basic math, and b) you have a really good memory. (Since both of these skills are incredibly useful, and since they can be learned by pretty much everyone, I'll cover them in future posts, but for now, use cash.)

If, at the beginning of the day, you do the math and the balance is negative, you have two choices:

a) Borrow enough money to cover the payments, plus maybe a little extra if you need gas or food. But remember that it is borrowed money, and don't ask for more than the bare minimum to get by until payday. Get that money into the bank right away.

Be aware if your bank has a holding period for items deposited via bank machines, or for cheque deposits. If it does, get to the bank during operating hours, and deposit the money, in cash, through a teller, who should credit it to your account that second.

Be aware that if you're depositing the money on the day the payment is supposed to come out, it may already have bounced, but it may still take a day or two for the NSF fee to show up. That's why you should be checking daily, and working a few days ahead of any bills due out.

b) The second choice (and again, it's only a choice if you're working a day or two ahead), is to call the creditor and explain your situation. Ask if they can hold the withdrawl until your next payday.

If you don't end up doing this every single month, and if you call a couple of days in advance, they're usually willing and able to do that. If you are doing it every single month, phone them up and have the payment date permanently changed to coincide with payday, if you can.

Finally, if you do make a mistake (and you will), you again have choices:

a) If you've only been hit with one fee, I'd suggest you suck it up. You made a mistake, and you'll have to pay the penalty. That's what we do with our kids, and that's what happens to us as adults. It's called "Life."

b) If you get hit with multiple NSF charges for a single mistake (e.g. You spend five dollars too much on gas. Your hydro bill bounces, and the bank deducts the NSF fee. Then, because the NSF fee put your balance down lower than even the least of your cheques and payments, every single one of them bounces, and you get hit with a new NSF charge each time), phone the bank and talk to them. Don't beg--it's demeaning and unnecessary. Simply explain the chain reaction that led to a -$200 balance from a $5 mistake, and that although you understand that you made a mistake, it shouldn't really cost you that much, and ask them to reverse all but one of the NSF charges.

Remember that the person you're talking to was not responsible for the charges. Don't argue, swear, yell, cry or beg. The charges are automatically applied by a computer that has no forgiveness built into its programming. Fortunately, human beings are nicer than that.

The main key to keeping your bank account in the black is taking responsibility for what goes on, and taking prompt action to correct matters when you've made a mistake. The faster you deal with problems, the smaller they are.

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