I was a guest on WVON “The Talk of Chicago” last week. We discussed The Washington Post article, “More Americans opting out of banking system.”

There are less Americans using banks after the Great Recession. And some listeners called in to voice their opinions.

One caller said: My husband and I are both college educated. We have two checking accounts and get direct deposit into our accounts. But I still pull out hundreds of dollars every month to pay the bills.

I buy $.25 money orders. I do this because the bank takes too long to clear my check. And I end up paying overdraft fees. One time I overdrew my account by $12 dollars and was charged $35 in overdraft fees for each check.

My Take: I’m glad to hear the caller has a bank account and receives direct deposit. Direct deposit saves her time and money. She doesn’t have to worry about paying any check cashing fees. And the money gets in her account faster.

But she’s doing the money shuffle. Since she’s buying money orders to pay her bills. This is costing her time and money.

Besides, there are drawbacks to using money orders:

  • Maximum Limits. Money orders have limits. For example, they could be limited to $500 or $1,000. If you need more money, you’ll have to buy multiple money orders and pay more fees.
  • Poor Record Keeping.  It’s harder to keep track of money orders.
  • Lose the Money. You have to keep your receipt or you could lose your money if the money order is lost, stolen or damaged.
  • Fraud. There are a lot of money order scams.

That’s why I recommended she use her checking account to pay bills. I understand her concerns about overdrafts, but balancing her account will help her avoid them.

To do it, she’ll have to keep track of her deposits and withdrawals. If she writes a check, pays a monthly service charge or makes a withdrawal (ATM, debit card), then she has to deduct it from her balance. That way she limits her spending to the money in the account.

Using her checking account will save her time and money. Plus, she’ll have:

  • Better Record Keeping. She can track her transactions easier in an account.
  • More Security. She won’t have to worry about taking out large amounts of cash to buy money orders. And the money in her account is probably insured up to $250,000.
  • Save Time and Gas. Time is something we never get back. I don’t know how far she’s driving, but have you seen the price of gas lately?
  • Pay Less. While she’s paying a great price for money orders. Nothing beats free!

For additional protection she may want to consider getting overdraft protection. This is when you setup another account (savings, credit card) to transfer funds into your account when it’s overdrawn. This typically costs you much less (some banks charge $10) than an overdraft. And your check is paid.

What’s your take on the money shuffle? Do you have any other recommendations to avoid overdraft fees?

Fun Fact: The money shuffle reminds me of one of my favorite teams—The 1985 Chicago Bears. Do you remember the Super Bowl Shuffle? Check out their moves in the video below. 😀