How to Avoid Those Pesky Bank Fees
We often talk about big ways to invest and save your hard-earned money, but there are other, smaller, things you can do to save yourself some cash. Today, let’s talk about bank fees.
Banks love to charge you for the privilege of housing your money. One of the ways you can get hosed is by paying exorbitant bank fees. Unless you plan to keep all of your money buried in the backyard (PS - not a good option...just sayin') you can’t completely avoid banks. But, there are things you can do to reduce the amount of your money the bank gets to keep.
You can look for a bank that charges minimal or no fees for everyday transaction use. Manulife Bank has a no-fee chequing account (with a minimum balance of $1,000, however electronic transfers to/from your regular bank's chequing account are always free…you can open one by clicking here). There are also options such as Simplii Financial (Formerly PC Financial) and Tangerine Bank (formerly ING). Some of these options have no restrictions (such as minimum balances). You can check their websites for more details.
Options Outside of the Major Banks
When shopping for better fees, look at other non-standard options such as credit unions. Some of them offer no or low fee accounts to their customers. If you choose a smaller credit union, keep in mind other services they may or may not offer. (For example, not all of them will have extensive networks of bank machines. You will always end up paying a fee when you withdraw funds from a bank machine that doesn’t belong to your bank.)
Options at Your Own Bank
You may not be looking to change to a new financial institution, so there are things you can look at with your own bank. First, can you avoid fees with a minimum monthly balance? Some banks will waive fees if you keep a certain amount of money (usually at least $1,000) in your account. This can help you avoid fees, but be wary of just how much cash you keep parked in your chequing account. Your bank may want $3,000 to $5,000 in your account to avoid fees, but they probably pay a pittance in interest. Avoiding bank fees might not be the best option if you are getting nothing back for your cash. And realistically, we don’t all have thousands of dollars we can just leave in a bank account.
If minimum balances don’t work for you, double check the service plan you have on your account. You might not be in the right plan. Too many customers think they will take the cheapest plan, not noticing that it only provides 10 “free” transactions. If your bank charges you $0.50 to $1.00 for every transaction above your 10 free ones, and you regularly do 20 or 30 transactions a month, the cheap plan isn’t so cheap for you. Going to a higher fee plan with more transactions included might cost you less in the long run.
Other Creative Options
Credit cards and lines of credit don’t have transaction fees, since they charge you interest on what you owe instead. Some people use their credit cards for all their regular purchases, then pay off the balance each month from their bank account, resulting in only one bank transaction.
This options works if you are diligent about paying off your balance. If you are one of those people who tend to let a balance build up, you won’t be saving yourself any money. You avoid bank fees, but you will pay a lot more in interest. So, only choose this option if you don’t overspend and can always pay what you owe.
It’s worth the trouble to periodically look at your banking and credit options to see if you are getting the best deal. Plans and your usage sometimes change, so what worked for you two years ago might not work now. Take a little time to review what you have to ensure you aren’t giving too much of your money to your already-rich bank.