As you get older, it’s easy to fall into banking habits that can quietly erode your hard-earned cash. Maybe you have a small fortune in your checking account “just in case,” or you’re leery of using a mobile banking app.

These decisions may seem small, but they can cost you more than you realize. The good news? It is always possible to make a change. Here are seven common banking mistakes to avoid now and throughout retirement to save money and earn more from your savings.

Banking Mistake 1: Keeping too much in check

Potential cost: Lost interest and greater risk if your payment card is stolen

One account mistake you can make is simply keeping a higher balance than you need. “It may seem like a smart way to feel safe, but in fact it’s a missed opportunity,” said Alex Langan, chief investment officer of Langan Financial Group.

Most checking accounts pay no interest at all. Of those that do, the average interest rate is just 0.07%. That’s the equivalent of earning $7 in interest for the year on a balance of $10,000. This is peanuts compared to what you can earn in other high yield bank accounts.

In addition, it can be dangerous to keep too much in check if your payment card is stolen. You can get your money back eventually – but do you really want to go through the trouble and worry?

Expert tip: “I always recommend having enough in the account to handle monthly expenses, plus a small buffer,” says Langan. “Then lock up all the extra money in one high yield savings account or another safe investment.”

Dig deeper: How much should you have in a checking account?

Bank mistake 2: Not opening a high-yield savings account

Potential cost: A hundred or a thousand in lost interest

Are you still using one traditional savings account that gives 0.10% interest or less? If so, you could be missing out on a lot of free money.

As of right now, many high-yield savings accounts (HYSAs) from FDIC-insured digital banks that SoFi and Upgrade pays annual percentage returns (APY) of 4% or more. By comparison, the national average is 0.45% for regular savings accounts. This may not sound like a big deal to some, but it adds up over time.

For example, if you have $10,000 in a traditional savings account with an APY of 0.45%, you would earn $45 in interest after one year and $460 after 10 years. In a HYSA with a 4% APY, you would earn $408 in your first year and $4,918 in year 10. That’s over $400 more in the first year alone, not taking into account the exponential growth of compound interest on your balance.

Although HYSA rates are falling, they still tend to be about five times higher than the national average savings account rate with no minimum balance requirement. So no matter what, not opening a HYSA is a big savings mistake.

Expert tip: If you’re still using a traditional savings account, find a new bank or credit union with best HYSA prices. You cannot lose money in a HYSA if you stay within the insured limits.

Dig deeper: I Tracked My High-Yield Savings Account Through 2024 Fed Rate Cuts – Here’s Why It’s Worth Keeping

Banking mistake 3: Paying ATM fees

Potential cost: $4.77 per out-of-network ATM transaction

ATM fees may sound small, but they can add up quickly. The average out-of-network ATM fee is approximately $4.77 per transactionincluding both the ATM owner’s fee and your bank’s fee.

If you use an out-of-network ATM just once a week, you could be spending over $245 a year in fees alone. Are you thinking “Not so bad”? Most of the banks that charge outrageous ATM fees are also the ones that charge monthly fees and pay low interest rates on savings. It settles down.

Expert tip: Use your bank’s ATM to find machines in the network. If you often need cash in areas where your bank doesn’t have ATMs, switch to a bank that refunds out-of-network withdrawal fees, such as Axos Bank, TD Bank or Ally Bank.

Dig deeper: Common bank charges – and how to avoid them

Banking Mistake 4: Using credit cards as an emergency fund

Potential cost: 20%+ in annual interest on unpaid balances

The whole point of build an emergency fund is to help you avoid taking on new debt in a crisis. Relying on credit cards instead can lead to high-interest debt that is difficult to pay off, especially on a fixed retirement income. It can too affect your credit ratingwhich can make it difficult to get lower prices and the best terms on new cards and housing loan.

The average credit card interest rate is 21.76%, according to the Federal Reserve. If you charged a $1,000 emergency from a card at this rate and only made the minimum payments, it could take years and hundreds of dollars in interest to pay off, depending on how your minimum payment is calculated.

Based on an APR of 21.76%, the current national average

Expert tip: Build an emergency fund in a high-yield savings account. Aim at three to six months of living expenses — potentially more if you’re already retired or on a fixed income.

Dig deeper: How to build an emergency fund on any budget

Bank mistake 5: Staying with the same bank out of habit

Potential cost: Higher fees and lower interest rates

Many people stick with their bank just because they have been there for years. A survey by Bankrate found that the average American adult has used the same primary checking account for 17 years. The main reason? Comfort.

If you are comfortable where you are, the fear of switching to a bank you have no experience using may make you hesitant to switch. However, this loyalty can cause you to miss out on lower fees and higher interest rates.

For example, maintenance fees at large, traditional banks like Hunt, Bank of America and Wells Fargo can range from $5 to $35 per month. But many online banks charge no monthly maintenance fees at all, but overdraft fees or other unnecessary fees on everyday transactions to save even more in the long run.

Expert tip: If you have a lousy bank, take the time to look for a new financial institution. Contrary to popular belief, switching banks does not affect your credit or your ability to get loans with solid interest rates in the future.

Dig deeper: Online banks vs traditional banks: How they compare in terms of prices, benefits and the safety of your money

Banking Mistake 6: Locking up too much money in a CD

Potential cost: Penalties for early withdrawal

Certificates of deposit are considered one of the safest investment options. But locking up too much of your savings in CDs can be a mistake.

CDs tie up your money for months or years and often comes with steep penalties if you need to access them early. For example, on a two-year CD, you can lose up to 12 months of interest for early withdrawals. With some banks, you may even lose part of your original deposit.

Expert tip: Never put your emergency fund money into a CD (that’s what a HYSA is for). For other savings, consider using a CD ladder strategy which spreads your money across CDs with different maturity dates so you get access more often.

Banking Mistake 7: Not embracing online banking and security features

Potential cost: Missed convenience and increased vulnerability to fraud

Many older adults hesitate to use online or mobile banking because of security concerns. But avoiding these tools can make managing your finances more difficult and potentially less secure, putting you at risk scams and frauds.

“Your banking data is already online, whether you use digital banking or not,” says Yehuda Tropper, CEO of Beca Life, which works exclusively with seniors. “Creating your own secure login actually helps prevent fraudsters from creating fake accounts in your name. It’s like putting a lock on your digital mailbox before someone else does.”

Mobile banking also makes managing accounts much easier. “You can manage your finances from anywhere, keep an eye on all transactions and receive alerts for any shady activity, helping to prevent fraud,” says Langan.

Expert tip: Set up online access to view your accounts if you haven’t already. Enable two-factor authentication and account alerts. Many banks have tutorials to help you get started.

Dig deeper: 5 practical ways to keep your financial information and identity safe online

Bank Checklist: Maximize Your Money

If you’re looking for more targeted help, here’s a great checklist to help you keep your accounts safe and avoid common banking mistakes.

Review your accounts for fees, interest and features
Open a high-yield savings account for better interest rates
Choose accounts with low or no monthly fees or minimum account balance
Keep one to two months expenses during inspection for regular use
Store expenses for at least three to six months in a HYSA for emergencies
Invest additional funds for retirement and other long-term financial goals
Enable two-factor authentication on all accounts
Set account alerts for large transactions
Use strong, unique passwords for each account
Set up online and mobile banking so you can monitor accounts in real time
Use automatic transfers to fund your savings goals
Use ATMs in the network or banks that refund ATM fees
Review your bank statements regularly for unauthorized transactions or suspicious activity

Dig deeper: Golden Years, Golden Profits: 7 Best Low-Risk Investments for Retirees

Sources

About our author

Cassidy Horton is a financial writer specializing in banking, insurance, lending and debt settlement. Her expertise has been featured in NerdWallet, Forbes Advisor, MarketWatch, CNN Underscored, USA Today, Money, The Balance, and Consumer Affairs, among other financial publications. Cassidy first became interested in personal finance after paying off $18,000 in debt in 10 months of graduating with an MBA. Today, she is committed to empowering people to stand up and take responsibility for their financial future.

Article edited by Kelly Susan Wagoner