These are the worst banking mistakes you can make, according to financial pros

Managing your bank account can be overwhelming at times, and the mistakes can carry hefty short- and long-term costs. Common missteps include not keeping track of transactions, neglecting fraud safeguards, mixing personal and business funds and skipping a high-yield savings account, which could have earned you thousands in interest.

Financial professionals told Bankrate about the worst banking mistakes they’ve made, how they recovered and how to avoid the same missteps.

Banking mistake: Keeping your funds in a low-APY account

Another common mistake is keeping your emergency fund or other short-term savings in a low-earning account. Standard savings accounts often earn rates as low as 0.01% annual percentage yield (APY). Meanwhile, high-yield savings accounts are earning 400 times greater or more, in some cases.

Upon graduating college, Bankrate community reporter Natalie Todoroff set up accounts in person at one of the country’s largest banks. When she asked about a high-yield savings account (HYSA), the banker downplayed the importance of such an account, she says. “Turns out, [this bank] doesn’t offer a HYSA, so it makes sense he’d want me to keep all my cash in their hands, even if it earns a measly 0.01% APY.”

For consumers who stick with such a low-earning account, it could mean hundreds, if not thousands, in lost interest over time. Here’s how different types of savings accounts stack up when holding $10,000 for a year:

Note: These calculations assume an unchanged APY, as well as no additional deposits, withdrawals or fees during the year.

How to avoid this mistake

Open a high-yield savings account, which you’ll most likely find from an online-only bank. These don’t have the overhead costs of running branches, and many pass along the savings in the form of higher rates.

After asking a Bankrate colleague for a recommendation, Todoroff opened a high-yield savings account with an online-only bank. “Now, my money is growing without my having to lift a finger,” she says.

If you’re shopping around for the right account for you, check out Bankrate’s list of best high-yield savings accounts. As an added bonus, these accounts are less likely than standard savings accounts to require a high minimum opening deposit or charge monthly fees.

Banking mistake: Not keeping track of transactions

Adam Horvat, director of finance at Digital Silk, is one person who didn’t keep an eye on his bank account. It was a mistake he made years ago, but he’ll never forget it.

“One of the worst banking mistakes I made early in my career was neglecting to regularly monitor my commercial bank account balances,” Horvat tells Bankrate. “This oversight resulted in a sizable check for a critical purchase bouncing due to insufficient funds, placing the company in a precarious situation. The problem was resolved, however, by setting up an overdraft protection facility and working on immediate capital injection strategies.”

How to avoid this mistake

Keeping an eye on transactions — personal or business — will help you avoid overdrafts and reduce your chances of becoming a fraud victim. It’s important to get in the habit of tracking your expenses.

“My key piece of advice is to diligently review all transactions and account balances to catch any potential issues before they escalate,” says Horvat. Automation tools can also prove remarkably helpful in providing real-time updates and alerts on your financial status.”

Horvat says he learned how important careful monitoring and timely intervention are when managing banking matters. This experience taught him that it’s vital to establish good banking routines. He recommends establishing a routine for both personal and business banking.

Banking mistake: Leaving your bank account vulnerable to fraud

Another mistake that could ruin your finances is being too trusting of others when it comes to your sensitive bank information. Robert Persichitte CFP, CPA, CFE, founder at Delagify Financial, witnessed the aftermath of this mistake. While assisting a bank fraud victim during his employment with the Boulder County Economic Crimes Division, he saw the consequences of being too trusting with bank information.

“The fraud victim unknowingly added a fraudster as an authorized signer to the account,” says Persichitte. “The victim thought the fraudster could step in if they were incapacitated and pay bills. The fraudster convinced them it would be easiest to give full access.”

“After the fraudster was listed as a co-owner, checks came out without the victim’s knowledge,” Persichitte continues. “It was difficult to reverse or even hold bank transactions because both parties had legal title to all the assets. They put their trust in someone they shouldn’t have.”

Persichitte was assigned to recover assets after what he says was a lengthy criminal case. “At that point, the money had already been spent, but we garnished the fraudster’s wages to pay the victim back little by little,” says Persichitte. “Because the transactions were technically authorized, the bank didn’t have to pay anything back.”

How to avoid this mistake

Persichitte advises using caution if you decide to add a co-owner to your bank account. Choosing the wrong person for a joint bank account could end in disaster.

“Don’t sign over your assets, ever,” Persichitte emphasizes. “Usually, there’s a better solution than transferring money to someone else. Talk to an attorney or people at the bank who can recommend alternatives. Even if they’re family, you never know how things will end. A power of attorney or trust can accomplish the same goals as a joint account but with much more protection.”

How to make smart banking decisions

Avoid common banking mistakes by making informed decisions.

• Set up account alerts. Most banks offer account alerts to notify you of a low account balance or suspicious activity.
• Build a buffer. Maintain a cushion of extra cash in your account to protect against unexpected expenses or math errors.
• Reevaluate your bank regularly. Make sure your bank offers competitive fees and services that align with your financial needs.
• Use in-network ATMs. You’ll pay an average of $4.86 in fees if you use an out-of-network ATM according to Bankrate’s ATM Fee Survey. Use an in-network ATM when possible to avoid paying unnecessary fees.
• Monitor your accounts regularly. Be on the lookout for any transactions you didn’t make. Early detection can stop a small issue from becoming a larger one.
• Open separate accounts. It’s important to open separate bank accounts for your personal and business finances. This will make it easier to track income and expenses for each account separately.
• Create a budget. A budget will help you track spending and save money effectively.