From a Banker: Stop Using Credit Cards!

How about a New Year's Resolution to end 2008 with hundreds - or maybe even thousands - of extra dollars in the bank?

If saving money sounds about as difficult as losing 25 pounds by swimsuit season, think again. It's actually as simple as promising that this year, you will find a bank that helps you save money.

Here's what you need to do:

First, stop using credit cards. Use debit cards instead.

Credit card companies want you to go into debt. Ever notice how they hand out so many gifts and rewards? It's so profitable to get you into debt that they're actually willing to bribe you to spend. It's pure gravy when you don't pay your balance in full or miss a minimum payment.

Unsurprisingly, credit card companies are good at getting people to spend beyond their means. In 1996, the average U.S. household had $5,875 in credit card debt. By 2006, that figure had climbed to nearly $10,000.

With debit cards, you're spending your own money. So you can't be lured into debt.

Next, you should avoid fees and earn interest on all your money. Most people use banks that pay virtually no interest on deposits and have a slew of hidden charges and complex fees.

Take overdraft fees. It is estimated that banks make a whopping $17.5 billion annually through these charges.

The reason this is so profitable is twofold. First, the average overdraft fee has climbed to $29. And second, banks apply it liberally.

Say you start your Saturday morning with $1,143 in your account - and then send $900 to your landlord, $50 to your electric company, $150 to your cable and internet provider, and $10 to your favorite charity.

Each recipient deposits the checks four days later. Unfortunately, that same day, your nephew cashes the $250 you gave him for his wedding six months ago. By the time he returned from his honeymoon, you'd forgotten about it.

Because most banks process daily transactions from the largest to the smallest dollar amount, you're looking at four separate overdraft fees. So if your bank charges the industry average, that's $136 in penalties.

A similar fleecing happens at the ATM. When your bank charges you to use another bank's cash machine, you get socked with two separate fees - one at the ATM and one on your statement. So instead of just paying what you see on the screen, you're actually paying double that amount -- to access to your own money!

When this double charge is factored in, the average ATM fee is $2.91. On a $50 withdrawal, that's a 5.8% charge.

Banking customers shouldn't have to navigate a minefield to avoid hidden fees.

So find a bank that offers a free overdraft line of credit with a competitive interest rate instead of charging overdraft fees. That way, whenever your checking account goes negative, you automatically borrow the cash you need at a reasonable cost rather than a lump sum fee. The "overdraft" simply shows up as a charge on your credit card, and there's no penalty fee.

Banks also shouldn't charge you to use another bank's ATM.

Finally, find a bank that pays high interest on all your money. These days, there's no reason to do business with a bank where you'll lose money over time. According to Bankrate.com, the average savings bank pays less than half a percent of interest - well under the rate of inflation. The annual percentage yield on the average checking account is even worse. A number of direct banks are now offering savings and checking accounts that pay three percent or more.

Millions of Americans use big banks because they assume that if a bank is well-known and popular, it must be offering its customers a good deal. But this clearly isn't the case.

Making this mistake could be costing you a fortune. In 2008, fixing this mistake could save you thousands.

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