Friday Financial Foul Ups: Being Down on High Interest Rate Checking

This week’s Friday Financial Foul Up will feature a guest post from Kyle at Suburban Dollar.  Kyle writes about his own financial experiences and openly states that he doesn’t know everything.  However, that makes his writing and his tone refreshing and I really enjoy reading his content.  If you aren’t already, look for Kyle on twitter (@suburbandollar).   Lastly, Friday Financial Foul Ups has been nominated for a Plutus Award. Please go here and give it a vote for Best Multi-Part Series. Enjoy!

If you would like to add your own financial foul up to this series, please contact me here.

When I started Suburban Dollar a little over a year ago it was at the end of what many people would call Online Savings Account boom. Interest rates were in the mid 3’s down from their epic highs of around 5% APY. Online saving wasn’t new but it was gaining in popularity and people were flocking to it in droves, driven by banks like ING Direct and Emigrant Direct. The populatity wasn’t limited to savings accounts either, banks had started offering interest bearing online checking accounts. I wanted in on the action.

The Situation

At some point in the last year my wife and I decided enough was enough and we needed to part ways. We both wanted to be able to spend, a little, money without having to feel like the other was judging their spending. We agreed to a set allowance amount and that we would have separate spending accounts for ourselves and joint account for bills, household stuff, and that kind of junk. My wife decided to use a bank account that was setup for us when we got our second mortgage, I was left to my own decisions.

Where I Fouled up

Making your money make money is a key piece of the personal finance puzzle. Stagnant cash is worthless, if you aren’t using it then you need to use it. That was the only thing on my mind when it came time to open up a checking account. I scoured the interwebs looking for the best rates I could find on an online checking account. It turned out one of my online savings banks had a good rate for their checking product and I jumped at it. I made sure there were ATM’s in my area, they were a little out of the way but I was sure I wouldn’t mind. Everything was set and I was ready to roll, they took direct deposits and after finagling with my payroll department I got set to enjoy my personal checking account freedom. The problems started almost immediately, my first direct deposit went in and my online interface showed I had $200 current and $200 available balance. I patted myself on the back and hit the store, well cafe for lunch but still. I ate my lunch and ran my card, the world was good, or so I thought. The next day I went in to check my balance and found not only had my available balance decreased but it had gone to -$27, WTF. The bank holds ALL deposits for 3 days even payroll direct deposits. I overdrew the account because of the hold and got hit with an NSF fee. They eventually waived the fee but it left a bad taste in my mouth. When I opened the account I made sure there were ATM’s in my area that weren’t super far away. I verified there was an ATM at a grocery store less than 1 mile away so I thought it would be good. Man was I ever wrong. I didn’t take into account 2 major problems.

  1. The ATM in question is fortressed behind ~8 red lights, a parking lot, and grocery store doors. It takes 30+ minutes round trip to get to that thing.
  2. The main thing I use cash for is to get out of the parking garage at work, there wasn’t any ATM’s convienent to work so I was constantly getting money out of a non network ATM.

What I Learned

I learned that it pays to know as much as you can about a bank account before you jump in. I went in with my eyes closed and it cost me. You would be surprised at how quickly ATM fees negate any potential benefit of an interest bearing checking account. In the year that I have had the account I have spent $38.50 on ATM fees and made a whopping $1.84 in interest. You slap those two numbers up against each other and you get earnings of -$36.66. I don’t know about you guys but that seems like a pretty bum deal to me. I have been with the same bank since I was a teenager. I watched it get bought out 3 times and they have been solid to me through and through. There is no reason for me to be crazy and get an online checking account when I could have gotten an account with my local bank which would cost me less in fees and hassle. Interest isn’t always the biggest decision you need to make when deciding where to put your money.


Do you like this series? Check Out The Previous Foul Ups:

Foul Up #21 – Brian (My Next Buck) – Pale Dude’s Shouldn’t Go Tanning
Foul Up #20 – Shawanda (You Have More Than You Think) – How Financial Knowledge Can Hurt
Foul Up #19 – Christine (Money Funk) – Love Can Hurt Your Financial Situation
Foul Up #18 – Clayton (Just Good Financial Advice) – Trying to Get Rich Quick
Foul Up #17 – Craig (Budget Pulse) – Black Friday Purchase Becomes a Dust Collector
Foul Up #16 – Jesse (PF Firewall) – The Fine Print of Rental Properties
Foul Up #15 – Paul (Fiscal Geek) – Unsuccessfully Restoring American Muscle
Foul Up #14 – Mrs. Micah (Mrs. Micah – Finance For a Freelance Life) – How Getting Married Wrecked My Finances
Foul Up #13 – Evan (My Journey To Millions) – Speeding Up Payments on Loan Interest, Not Principal
Foul Up #12 – Elle (Couple Money) – Stretching Yourself to have a Comparable Car to Your Friends
Foul Up #11 – Revanche (A Gai Shan Life) – Sibling Bailouts Cost More than Just Money
Foul Up #10 – Brad (Enemy Of Debt) – There’s Nothing Interesting About Interest-Only Loans
Foul Up #9 – Jason (Redeeming Riches) – Buying a Car with a Balloon Payment at the End
Foul Up #8 – David (Money Under 30) – Being Too Eager to “Move Out” and “Move Up”
Foul Up #7 – Matt (Debt Free Adventure) – Upside Down and Paying The Price
Foul Up #6 – Brian (MyNextBuck) – Overdue Books Prevent Me From Renting an Apt
Foul Up #5 – Kelly Whalen (The Centsible Life) – Poorly Planned Vehicle Purchase Costs $24,000
Foul Up #4 – Stephanie (Poorer Than You) – Signed My Life Away at Age 17
Foul Up #3 – Deliver Away Debt – How I Wasted Over $10K and 11 Months
Foul Up #2 – Brian (MyNextBuck) – Quick Fixes to Weight Loss
Foul Up #1 – Brian (MyNextBuck) – How I Didn’t Earn $3000 in Free Money

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