Navigating the banks: New service charges, confusing options, varying interest rates abound

Key Points

One former bank executive estimates that you could overpay your bank through service charges, credit card fees, business loans and checking and savings fees by tens of thousands of dollars during the lifetime of your business or practice - unless you learn how to beat the banks at their own game.

Savings account

Checking account

Because most banks pay little or no interest on business checking accounts, your job is to keep the least amount of money possible in your checking account, while making certain that you never overdraw it.

Ask your bank to link that new money market account to your checking account, then set it up for telephone or online transfers between the two accounts. Make all your deposits into the money market account, where they will immediately start drawing interest. Then, transfer cash into the checking account only as you need it to cover checks written.

If you or your office manager have never done online or telephone transfers, be assured that the process is simple and quick. Your bank will be happy to explain.

Improve interest income

In our current economy, CDs are a reasonable alternative to risky market investments. Because of today's unusually low interest rates, stick with short-term CDs - no more than six to twelve months.

First offer

Shop around before you sign. Bank deregulation has produced a competitive environment with wildly differing interest rates and service charges. If you can find a better deal than your present bank is offering, take it. There is no reason for you to stick with a bank that isn't competitive.

Never overdraw

In a largely invisible ploy, some banks make customers pay big penalties for small errors.

Let's say you accidentally overdraw your business checking account. You have $300 in the account, and you write three checks in one day. The first is for $10, the second for $20 and the third for $320.

Some banks process checks not in the order they receive them but in order of size. In such a case, the bank will process the $320 check first. That would mean all three checks -not just one - would bounce. Then you'd be hit with three separate bad check charges. You'd be out as much as $105 in painful overdraft charges, as many banks are now charging as much as $35 for each overdrawn check.