I’m a Banking Expert: 6 Mistakes People Make at the Bank During a Recession

Economic ups and downs still have lots of people worried about a potential recession. During times of downturn, many people become hyper-focused on the markets, jobs and their own personal finances tied up in banks .

Check Out: States Whose Economies Are Failing vs. States Whose Economies Are Thriving

For You: 7 Reasons You Must Speak To a Financial Advisor To Boost Your Savings in 2024

While there might be some desire to move money around or take it out of financial institutions altogether, that could actually end up doing more harm than good on both a macro and micro level. GOBankingRates reached out to banking experts to understand the six mistakes that people make at the bank during a recession. Here is what we found out below, and you can also check out why a recession is worse for your wallet than inflation.

Failing To Review Your Financial Goals

Just because there is a recession does not mean you don’t have financial goals, nor any way of working on achieving them. Do not lose sight of your future when it comes to your money.

“One of the most common yet frequently overlooked mistakes during a recession is not re-evaluating your financial goals,” said Adam Garcia, founder of The Stock Dork. “Most people will carry on saving, spending as well as investing just like they were used to before the economy went down.”

He continued, “However, it is better to be cautious in times like these. Review your financial plan by focusing on liquidity and debt reduction rather than aggressive growth or luxury purchases if possible. This should ensure you are grounded and do not go through tough times when sources of income become unpredictable.”

Read Next: I’m an Investor: I’m Making These Money Moves Immediately If Trump Wins

Not Having a Safety Net for Your Account

Running your account into the red can be dangerous, particularly during a recession.

“Overdrafting an account might seem like a small error, but during a recession it can have severe consequences,” Garcia explained. “If you overdraw often enough, those fees add up quickly and may hurt your credit score thus making it hard for you to get loans or credit cards when they would be most useful to you.

“To avoid this scenario, consider putting aside a small emergency cushion in checking or linking it to a savings account for automatic transfer purposes. In case of overdrawing, call your bank immediately so that you could tell them what landed you in such a position. Many banks offer courtesy fee waivers if it’s a rare occurrence or due to an exceptional circumstance,” suggested Garcia.

Failing To Recognize Interest Rate Changes

During times of economic turmoil, interest rates can change. If you have a loan or credit card connected to your bank, not taking note of these fluctuations can put you in dire financial straits.

“Central banks usually adjust interest rates during recessions leading to fluctuations that affect savings and loan repayments directly. Therefore, one of the mistakes that people make is not paying attention to these changes,” Garcia said.

“If interest rates drop, it might be an excellent opportunity to refinance high-interest loans or mortgages,” he added. “Conversely, if you notice interest rates rising, you should consider locking in lower rates for savings accounts or certificates of deposit (CDs). Taking the initiative regarding interest rates can save you a lot in the long run.”

Stopping Automatic Payments

Money tends to become tight during a recession, but nevertheless, there are bills to pay. If you have automatic payments turned off, consider turning them back on again.

“Some customers may stop automatic payments for loans, credit cards, or utilities with the intent of saving money,” said Garcia. “While this may seem like a way to take control over cash flow, it will lead to missed payments, late fees and a damaged credit score.”

Instead, he advised this: “A better strategy is to set up reminders for reviewing your finances before payment is automatically deducted in addition to negotiating with your bank about revised payment plans when experiencing financial hardship. In case of missing a payment, contact your creditor immediately. Many are willing to work with customers during tough times.”

Ignoring the Importance of a Relationship With Your Bank

You might feel scared or worried to call your bank during a recession. Do not be timid about reaching out because usually they can help you.

“When things are going well, you may view your bank simply as a service provider,” Garcia said. “However, during an economic recession, having a strong bond with your bank is priceless. Many clients overlook consulting their bank manager or financial adviser for personalized advice, information about new financial products and at times negotiating better terms on accounts. If you have not done this yet, do it now.”

He added that banks usually have programs tailor-made to support their customers during tough economic times that aren’t advertised widely. It’s definitely something to look into.

Not Keeping Track of Your Credit Report

According to Garcia, if you fail to check your credit report regularly during a time of recession it may cost you more than just money.

“There is increased risk of identity theft and credit fraud when there is an economic recession since criminals take advantage of the chaotic financial situation that characterizes recessions,” Garcia pointed out. “Regularly monitoring one’s credit report ensures that one can quickly address any disparities or fraudulent activities in question and other matters that might have been overlooked.

He added that “paying attention to one’s credit rating will enable him/her to benefit from opportunities such as clearing debts or rectifying errors which will be helpful when borrowing in future.”

The good news is, if you make any of these common mistakes above, you can still bounce back.

“In this case, approach your bank so as to find out the options available,” advised Garcia. “Many institutions are more flexible than they appear, especially in a time of economic downturn.”

Finally, Garcia urges banking customers to “make use of whatever training materials on finance are offered by banks — many provide seminars, online classes at specified periods or personal counseling for customers who are dealing with tough economic times.”

This article originally appeared on GOBankingRates.com : I’m a Banking Expert: 6 Mistakes People Make at the Bank During a Recession