Personal Finance Advice

Do you pay attention to the fees your financial institution charges you for using an ATM? It doesn’t matter if you’re pulling cash out of your account, checking your balance, or making a deposit with an envelope…some banks and credit unions will try to get some money out of you for the transaction.  If you rarely use an ATM then fees probably aren’t a big deal to you, but if you stop to get cash every couple of days then the fees can really add up.

Do you want to use your money to buy the things you need and to pad your account, or do you want to hand a portion of your money over to your financial institution for the privilege of using an ATM?

Not all financial institutions charge fees for using an ATM.  Most banks and credit unions charge no fees for using ATMs that belong to them.  For example, if you have a checking account with Wells Fargo and you use a Wells Fargo ATM at the mall to get money, you probably won’t encounter a fee for the transaction.  The fees start piling up when you use foreign ATMs.  These are automated teller machines that aren’t owned by - or affiliated with - your bank or credit union.  Suddenly you’re hit with two different fees: a fee from the owner of the ATM and a fee from your financial institution for using someone else’s ATM.

You might think these fees don’t really add up to much, but if you frequently utilize foreign ATMs then there is a good chance you’re paying quite a bit of money in fees.  Even if your bank only charges you a $1 fee every time you use a foreign ATM and the owner of the ATM only charges you $2, that’s already $3 just to access your own money.  If you stop at the ATM a few times a week, that’s $9 a week which translates into over $35 a month. 

In other words, you’re losing out on a dinner out every month because of the fees you’re charged for using the ATM.

So how can you avoid paying these fees? If you can stick to ATMs owed by your financial institution then you might wind up not paying any ATM fees at all.  If you have no choice in the matter - and really don’t want to switch financial institutions - then try to plan out your ATM visits to minimize how many times you stop to pull out cash.  If you know you’ll need $120 in cash to get through to the end of the week, don’t stop for $60 today and then another $60 in a few days; pull it all out at once and save on the costly fees.

You might also consider shopping around for a bank or credit union that not only doesn’t charge fees for using foreign ATMs, but also reimburses you for fees charged by the owner of the ATM.  Don’t waste your money paying fees just to access your funds.

There is just something about cash that makes consumers stop and think about what they are spending.  Slapping a credit card onto a counter is a lot different from counting out the bills to pay for something, especially when it’s for a large sum of money.  Most financial experts agree that people tend to spend less money when they use cash as opposed to paying with a credit card or debit card, and that’s probably due to the psychological impact that cash can have.

Pay with a credit card, you aren’t immediately losing anything.  Pay with cash and your wallet gets lighter.  You actually witness the money leaving your hands and going somewhere else.  It’s a powerful experience.

Try an experiment for one week.  Instead of using your credit or debit card, use cash for all your purchases and payments that aren’t automatically debited from your account.  That means that your trip to the grocery store will be paid for in cash.  When you fill up your gas tank you will have to pay with cash instead of swiping your card at the pump.  Any impulse buy you indulge in will be paid for in cash…although most people find that their impulse buying comes to a screeching halt when they can’t whip out a credit card.

Track your spending during this week and see if you wind up saving some money.  Most folks who try this find out two things relatively quickly:

1.  Using cash for every single purchase can get pretty inconvenient, especially when you’re in a hurry.

2.  It’s much more difficult to part with cash than it is to use a credit card.

In theory, you might think it would be harder to use a credit card because you know that it’s going to obligate your future income as well as potentially cost you money in interest.  In reality, however, the psychological implication appears to be quite different.  Cardholders have adapted to using credit on such a regular basis that the reality of the situation is lost. 

In other words, cash evokes an emotion in most consumers that credit card usage may not: loss.

This is why some people decide to switch to a mainly-cash system, especially when they are trying to get their finances in order or pay down debt.  Using cash can be a fantastic budgeting tool.  Give it a try and see if you don’t wind up realizing a thing or two about how you view cash versus credit when it comes to your spending.

A man sits on the couch with his spouse, lamenting about how they can’t possibly make more than the minimum payments on their credit cards this month.  They are both incredibly frustrated because they can’t seem to get ahead financially.  They both agree that this entire situation is unfair, and soon they’ll both sit down and figure out a way to tackle this debt problem once and for all.

Then they turn on the television to browse all the premium channels they pay for while eating the pizza they ordered in.

What is wrong with this picture? The most glaringly obvious thing is that people who do not have the money to pay more than their minimum credit card payments probably shouldn’t be enjoying expensive cable and delivered pizza.  The less obvious thing - and the thing that needs the most attention - is the absence of a comprehensive budget.  These folks don’t have any idea where their money is going, but if they sat down and made the effort to figure it out they would probably take a hard look at their finances and cancel the cable and stop ordering in when they could cook at home for a fraction of the cost.

Getting your personal finances straight involves much more than just not spending money on frivolous things.  You have to be committed to budgeting your money and figuring out where you funds should be going every month.  Sometimes folks don’t really make the connection - like figuring out that the cable bill would probably cover much more than the minimum payment on a credit card - until they write everything down and have a look at it on paper.  It can be an unsettling discovery, but an important one nonetheless.

 If you feel as though you aren’t making the financial progress you should be, start writing down how much money you spend on things you don’t really need.  The picture will become clearer when you start to realize that the money you pay for a mocha latte every morning might cover the cost of a couple of bills you thought you were having trouble paying.

It’s time to get your financial priorities in order.