New service charges, confusing account options, and wildly varying interest rates on savings accounts and CDs are just a few of the techniques banks are using to improve their bottom lines these days-at the customer's expense.



How bad is it? Former bank executive Edward Mrkvicka estimates that contractors will likely overpay their banks through service charges, mortgages, credit cards, business loans, and checking and savings fees by thousands of dollars in a lifetime-unless one learns how to beat the banks at their own game.

The following tips are designed to help businesses do the right thing when it comes to banking.

Bank on this!

Never put a dime in a passbook savings account-With the interest rates commercial banks pay these days, savings accounts are guaranteed to lose money when inflation is factored in. Any money kept, business or personal, in a bank savings account, should be closed at once and put it in an account that will pay a higher rate of interest.

The account one needs is available right at your own bank: It's called a money market account. It will pay significantly more interest than a savings account and still allow one to withdraw money on demand. Some money market accounts even allow one to write checks against them.

The improvement in interest will not be as dramatic as you might get from some other investment vehicles. However, when interest rates begin to move up again-and they will-so will the interest income appearing on the bottom line.

Remember: The kind of money management that will maximize the bottom line for a contracting business calls for taking every advantage available.

Whether paying interest or receiving interest, never be satisfied with the first offer- Shop around before you sign. Bank deregulation has produced a competitive environment with wildly differing interest rates and bank charges. If you can find a better deal for your business accounts than your current bank is offering, take it. There is no reason to stick with a bank that isn't competitive.

Consider certificates of deposit (CDs) as a place to stash extra business or personal cash- In today's uncertain economy, the best investment accounts available through most commercial banks are CDs. Typically, CDs can be opened for varying periods of 90 days to five years. Each of these maturities will yield a different interest rate, depending on the current market and local competition. As a general rule, the longer one is willing to leave money in a CD, the higher rate of interest it will return.

One popular way to gain maximum advantage investing in CDs is to break up the total kitty into several equal parts and invest them in CDs with staggered maturity dates. This technique allows one to take advantage of the highest available interest rates while ensuring that a maturing CD and its penalty-free cash are never very far away.

Don't think that the bank will give the best available rate when you allow a CD to roll over automatically- It almost surely won't. Always call or visit the bank and ask to review all current interest rates for CDs, including any promotional rates that might be available. Banks often run special promotions offering interest rates higher than their regular rates. One can be dead certain that an automatic renewal won't get that rate unless one asks.

It is likely that a bank will do a dependable job of sending you a reminder when each CD approaches its maturity date. The notice will dutifully explain that you don't have to do anything at maturity if you don't want to. If the bank doesn't hear from you, they'll just roll it over. That is, they'll renew it for the same period as the original and pay you their current interest rate.

Sounds fair enough, so millions of busy entrepreneurs are taking that easy road. The banks love people like that, but those millions of people are making a mistake.

Keep a lid on bank charges- Banks made an astonishing $5 billion in 1999 from assessing bad check charges. 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 such checks not in the order they receive them but in order of size. In such a case, the $320 check would be processed first. That would mean all three checks, not just one, would bounce. Then you'd be hit with three separate bad check charges. Besides an overdrawn account, you'd be out as much as $105 in painful overdraft charges (some banks are now charging $35 for each overdrawn check).

Keep the least amount of money possible in your checking account- Most banks pay little or no interest on business checking accounts, so keep that balance to a minimum while making certain that you never overdraw it or incur minimum balance fees. Here's a little technique that will allow one to safely and conveniently come out the winner:

Ask your bank to link your new money market to your checking account so that you may transfer money between them by telephone or online.

From that point on, never make a direct deposit into the checking account. Make all deposits into the money market account where they will immediately begin drawing interest. Transfer money to the checking account only as needed to cover the checks you write. This is one of the smartest ways to maximize operating funds. But don't expect to hear about it from the bank.

Divorce!

Get a divorce from those ATMs-Remember when your friendly bank introduced those new-fangled automatic teller machines? You didn't take to those gadgets at first, and your bank was not happy about that. After all, if they could persuade you to use them instead of standing in line to do business with a live teller, they stood to save a lot of payroll.

So, the banks embarked on extensive marketing campaigns designed to persuade the public to help them lighten their payroll load. Of course, they didn't put it quite that way. Instead, the ads trumpeted how convenient and time saving it would be to use an ATM instead of bothering to visit a live cashier. What's more, this new service would be entirely free.

Millions took the bait. In time, ATMs became almost as familiar as stop signs. Once the public became hooked on ATMs, the predictable happened: Some anonymous bank executive had a brainstorm. "Let's levy a charge on customers' accounts whenever they use an ATM owned by a bank other than our own," he said. Once that word got around, nearly every bank in town jumped on the bandwagon. At last count, nearly 90 percent of banks are assessing ATM surcharges. Fees now average from $1 to $2 per transaction.

This outrageous situation presents one more opportunity to keep the bank's hands out of your pockets. If you're paying anything at all for the use of ATMs, stop using them. Simply cut up that ATM card and resume that old-fashioned practice of stepping inside the bank to transact business.

Dumping the ATM card can be a marvelously liberating experience, requiring nothing more than a slight change in your timing. Once you accept the fact that you must arrange your schedule to visit your bank only during banking hours, the battle has been won. With the extended banking hours offered by most banks these days, the whole process is a non-event. In fact, you are likely to find that the line waiting to use the ATM machine is often longer than the line inside the bank.

However, if you're so hopelessly addicted to ATMs that you turn numb at the thought of going cold turkey, there is still hope for you. Check out www.youratmstore.com or www.atmsurcharges.com on the Internet. These sites provide lists of ATMs all over the country that are no-charge even for people who are not customers of the bank involved. However you do it, don't allow yourself to be charged for withdrawing your own money from your bank.

Consider firing your bank- Chances are that you've been a victim of merger mania at least once. That's when you wake up one day to find out that the bank you've been doing business with is no longer around. It's been merged with a strange new bank that promptly laid claim to your accounts.

Will this new bank that is larger than the gross national product of some countries treat you better? Will it exercise economies of scale in order to bring you bigger and better services?

Forget it. Experience has clearly shown that the huge megabanks resulting from merger mania are raising inefficiency and customer alienation to undreamed of heights. No, this isn't the work of arch criminals intent on robbing us blind. It's simply the classic symptom of unwieldy bureaucracies grown to a size that defies the best of management intentions. Now, with new laws blurring the line between banks and other types of financial institutions such as insurance companies and stock brokerages, the financial behemoths can only grow even larger.

Fortunately, solving this frustrating problem is relatively painless. Just search out the smallest FDIC member bank in your neighborhood and give it your business. They'll be happy to have you as a customer. They need you and they will appreciate you. You'll receive a lot more personal attention from a small neighborhood bank than you ever will at a financial behemoth.

Even at a small bank, you should follow the principles outlined here. But you'll be doing it in a friendlier atmosphere. Fewer banking frustrations will leave you better prepared to enjoy your stroll down the path to greater riches.