Four Current Account Mistakes

Post by Sharat on April 14, 2010 · Under Featured Articles, Personal Finance, banking, credit cards · Comment 

Many of us who use current accounts for our primary bank account make a number of common mistakes, thinking that it is nothing more than a place to stash one’s cash. Used in the correct manner, the humble current account can be so much more than that. Used in the wrong way it can prove very costly, resulting in having to hand over lots of cash to your bank for no reason.

Here are four current account mistakes to avoid.

1) Do Not Be Ruled By Overdraft

Your overdraft should not merely considered as spending money. If you do run an overdraft, you should make every effort to pay it off.

If you do however have a need to run an overdraft, then you should make sure you prearranged one with your lender, with a set limit that you know you can stick to. For example if you know you are going to spend more than $500 a month on your overdraft, there is no point in agreeing a $500 overdraft with your bank, not unless you prefer being hit with higher interest charges and fees.

Similarly, make sure you’re getting a competitive deal on your overdraft – preferably by finding an account that doesn’t charge any interest at all.

2) Don’t Ignore The Interest Rate

Some people believe that the interest on their current account is not relevant, but why receive no interest on your deposits, when there are some banks out there willing to pay you interest on what you do hold in your account.

These days Australian lenders are fighting an increasingly competitive war for depositors as they seek more stable sources of funding, so it’s worth checking out which current account deals are on offer.

3) Don’t Pay For Extras You Don’t Need

A lot of current accounts come with extra perks, such as airport lounge access, travel and mobile phone insurance.

What most people fail to understand is that these perks come at a cost, that can be as much as $300 a year. Before you commit to these perks, which often sound quite tempting, you should find out how much having access to them will cost you, and whether that cost is actually worth it.

For example you may want to find out whether the insurance you receive with your current account covers your needs, or whether you can save money simply by applying for insurance when you need it.

4) Not Using Direct Debit Facilities

One of the biggest advantages of a current account, is the ability to set up direct debits that pay your bills off on time.

Direct debits not only help you remember to pay your bills, but can save you a ton of money. For example setting one up to pay your monthly credit card bill means you never miss a month’s payment. Failing to pay a monthly credit card bill is a very common mistake and usually results in being charged additional fees, and in the worst cases, even have you card cancelled.

Paying utility bills such as electricity through direct debit can in some cases also result in your provider doling out discounts.

Direct debits are also a great way of saving money, in effect transferring money you want to save every month from your current account to your savings account.
So make sure you take advantage of the facility.


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