As far as financial problems go, having too much in your checking account is a welcomed one! However, even though this money is likely insured by the FDIC should your bank/credit union become insolvent, and it isn’t in the stock market, there are still risks involved. In attempt to keep it simple, let’s group the risk into two scenarios:
First, in the scenario where your debit card is stolen, most banks have a max per purchase limit ($2,000 for example), but unlike a credit card, the money is still taken immediately!
Things to know:
- If you notify your bank before the card is used by thieves, you aren’t responsible for any charges.
- Your loss is limited to $50 if you notify your financial institution within two business days after learning of the theft.
- After that 2 business days, your loss could be as high as $500 as long as you report within 60 days of your account statement date.
- After the 60 days, you risk unlimited loss and responsibility for charges in your account!!!
Second, in the case someone has your account info and access directly to your money, you will be entitled to the money that was stolen back, but the inconvenience is much greater. You would have to file a police report, the account would be frozen and while the investigation goes on, you could have to wait two to three weeks before your money is actually returned. If you wait too long, most resources say 13 months, you could lose that money all together. This is a scenario where having a large balance in that liquid checking account really opens up your liability and is not worth the risk.
Action Steps to take:
- It’s tedious, but you have to check your bank accounts statements/balances/transactions. Theft typically happens with small purchases first to see if they go unnoticed.
- Second, try and report any suspicious activity or fraud with in two business days.
- Third, check your credit report periodically for new accounts.
I surely know none of this topic is fun, but it is the reality around us and I hope this information helps.