In order to be in control of your own financial destiny, one must have full control over your own banking accounts.It is a fact that many people are completely ignorant about the interpretation of sundry bank charges and interest charges (or credits) on their accounts. We should all aim to reduce our banking costs and to maximize our interest earnings from our hard earned income. Most people have their monthly income paid directly into a bank and therefore personal online banking becomes a must in order to have total flexibility for daily control.
So, what is required to gain control? To get started, the following basic elements must be set up:
Apply to your bank to open an internet banking facility. The bank might charge a small fee for this but on some accounts it is for free.
Request your bank to link all your accounts to your facility. This should include your cheque account. investment account, savings account, credit card account, mortgage account and loan financing accounts.
Set up your payment beneficiaries to allow you to pay most of your accounts from home.
Set up your monthly payment maximum with your bank. This is for security reasons and you can apply to increase the amount in any month if required.
Once you have done the above, you are ready to move on to understanding your monthly payments.
The first action required is to understand exactly what the interest charges are on your various outstanding debts. This is very important because the key to having more of your own money is to leverage the interest that you are being charged. Similarly, you must understand what the interest income would be on your credit balances in your various accounts. Furthermore, if you have a normal cheque account, you should also open a flexible money market type account that pays a higher interest rate. Most banks have such products.
The next step is to make a decision on which account will give you the best return. Let us assume that the interest cost rankings are first credit cards, then bank overdrafts, then vehicle finance and then home mortgage. One can then priorities payments accordingly. Ideally, one should never pay interest charges on credit cards and bank overdrafts and any spare cash should go into paying off vehicle finance and home mortgages. It is good practice to pay off all interest bearing debt as soon as one can since saving in a savings account at a lower interest earning rate does not make sense. It is however necessary to have some cash on hand and such funds should be kept in a flexible money market account.
Armed with the above knowledge, one can now move on and start transacting online. The first priority is to ensure that your pay cheque is paid into your money market account. If this is not possible, then one must transfer the money on the same day to achieve this. This money will earn interest on the daily balance and such interest is compounded. The next priority is to fully understand when all bills and payments are due. Never pay a bill from a company offering credit terms before the due date since you are losing interest in your hands. Also ensure that you understand the credit terms offered by credit card companies and retail merchants with whom you might have accounts. One should use the full credit term offered and endeavor to pay the account in full on the due date. Beware of reduced payment amounts offered by credit card companies since the unpaid balances are subject to interest charges which are also compounded.
At his point, you are ready to start making transfers and payments online. The first requirement here is to draw up a schedule with due dates and dues as a payment guide. Next, decide on what your monthly cash requirement will be and any spare cash should be paid into the highest returning interest bearing account. A point to note here is that the earlier you pay money into interest bearing accounts, the more you gain. After this, you simply follow the schedule and pay the creditors on the due dates. Obviously, if one had no interest bearing debt, one would simply pay all creditors in full on the due dates and retain the balance of your income in the money market account until other investment options are decided.
A good discipline is to open your main account daily and to check for transfers (in or out) and charges to your various linked accounts to ensure that you are in control.
In conclusion, by doing your own daily banking, one gets the sense of being in control of your own financial destiny. Being able to exploit interest earning opportunities is very rewarding and to fully understand all your own credit commitments, is in my view, living in the real world.