Table of Contents Show
Believing these common banking myths could be costing you
By
Joshua Sidorowicz
A new NerdWallet survey reveals many Americans believe common misconceptions about bank security, account fees, and where you should be saving.
But believing these financial myths can lead to costly mistakes when it comes to managing your money.
MYTH: Online banks aren’t safe
More than a third of Americans wrongly believe online-only bank accounts are not as secure as accounts offered by traditional banks, according to the survey of more than 2,000 U.S. adults conducted online by The Harris Poll.
The misconception is more widely held among younger Americans, with 50% of Gen Z respondents and 43% of millennials believing the myth. Just 27% of Gen X respondents and 28% of baby boomers said they believed online banks aren’t as safe.
Online banks conduct all their banking operations through websites and mobile apps, rather than physical branches.
Ally, Discover and American Express National Bank are examples of online-only banks.
“There are advantages to online banks that people are missing if they’re thinking they shouldn’t put their money there because they’re less secure,” said NerdWallet investing expert Kate Ashford. “Online banks tend to have lower fees, they tend to offer higher interest rates, and so there are advantages to banking with an online bank that you might not get from a traditional bank.”
An FDIC-insured online bank is required to take security measures designed to make them as safe as brick-and-mortar banks. Ashford said, just like with any other online activity, it’s important to take precautions such as enabling multifactor authentication, using strong and unique passwords, and not logging into accounts on public Wi-Fi.
MYTH: Money for mid-term savings goals should be invested
More than 40% of Americans think money for savings goals more than one year away should be invested in the stock market, the survey found.
While average annual stock market returns are higher than average savings account interest rates, Ashford warns it’s not the safest way to save for goals like a dream vacation, wedding or down payment on a home.
“For those shorter-term goals, you want to make sure that money stays in place,” she said. “If you’re saving for a wedding, that’s not the money you want to take big risks with, and the stock market is kind of a risky place to put those — because the gains are not guaranteed.”
Instead, your savings for goals between two to five years away should be saved in a high-yield savings account or a money market account. The returns may be lower, but you won’t risk losing any money.
MYTH: Bank account fees are unavoidable
Three in 10 Americans believe having a bank account means paying unavoidable fees, according to the survey. But the reality is many fees are avoidable, if you know the rules.
Monthly maintenance, overdraft and ATM fees are some of the most common banking fees. But Ashford says choosing a bank that doesn’t charge them, or taking the appropriate steps to avoid them, can make all the difference.
For example, linking your savings and checking account can help avoid overdraft fees, Ashford recommends. If you charge more than what’s available in your checking, the difference can be pulled from savings. You can also set up alerts to notify you if your balance drops below a certain amount.
Generally, monthly maintenance fees can be avoided by keeping a certain minimum balance in the account, while ATM fees can be avoided by only using machines in your bank’s network or choosing a bank that reimburses for out-of-network ATM use.
Do you have a money question, a consumer issue, or a scam story you want to share? Email InYourCorner@cbs.com
