Wednesday, May 22, 2013

Rule #28 Pay No Bank Fees.

Nickel and Dime: verb. To drain or destroy bit by bit, especially financially

People complain about banks and their fees ad nauseam.  You know what I mean.. "The greedy banks are being greedy."  "I'm getting screwed by the banks in fees."  Blah blah blah.  But these folks do very little to change the fact that they're paying all these fees.... You know what I call these people?  Whiners.  Don't be a whiner.  If you don't like paying bank fees then stop paying bank fees.  

Here are some strategies we use to avoid paying any bank fees or make it so the benefits of membership outweigh the fees (as is the case in a Credit Union).

1. Use/Join a Credit Union.  Simple eh?  Well some people have been with the same bank forever and yet there are Credit Unions all over the place that you can join and get reduced rates on fees and quite often they offer profit sharing that returns some of the profits to members/shareholders.  We've been members/shareholders of a Credit Union for about 11 years and we've gotten back more in profit-sharing annually than we've ever paid out in fees.

2. Don't use Bank Machines that are not owned by your bank.  I bank at TD and I will always travel the extra distance to save on the transaction fees.  Never in a bazillion years should would I use a "While Label" machine.  White label machines are the worst! They can take a buck or two from each transaction and then YOUR bank will also charge you a buck or two on the other end.... So if you take out $20, you could pay $2-$4 in fees.  There is nothing like a 20% fee taken out with your withdrawal to erode your bank balance.  I occasionally get caught a couple times a year (usually in a pub) without any money and the bar will have a white machine instead of taking debit payments.  The pub is getting a cut of every transaction so they can squeeze you a bit more.  In this case I will pay with a credit card and then pay the bill off when I get home later that night.  Those Bank Machine fees are easy to avoid if you just make the effort.

3. Maintain the minimum balance to waive the monthly account fee.  As mentioned above I bank at TD. We have an Infinity Account with them that allows infinite TD bank machine transactions along with some other fancy perks all for the monthly fee of $14.95.  Thats about $180 a year.  They will waive the monthly fee if we maintain a balance of $3500 or more.  So that's exactly what we do.  To save $180 on a $3500 balance is about a 5% return on your money.  This is a guaranteed saving... much better than the crappy 1-2% you get on GICs these days... Before you start putting money into GIC and other pay-nothing "investments", why not play by the rules and reduce the amount of fees you're already paying.  Of course it takes some discipline to maintain that bank account at or above the right balance, but thats what managing your finances is all about... Discipline.

4. Use Pay As You Go Overdraft Protection instead of a monthly fee.  I used to pay a monthly fee of $2-$4 (the price rose over time) for the protection in case I wrote a cheque that I didn't have the money for.  Since we now maintain a balance of over $3500, we never use the overdraft anymore and if we do get ourselves in a situation where we are overdrawn, we pay a one-time fee of $5.  It's certainly a better deal than paying for something we're not using.  Add this $2-$4 we're saving on overdraft fees to the $15 we're saving from maintaining a $3500 balance and the savings are beginning to become material.

So there you have it.  Last month we paid absolutely nothing in bank fees so it definitely is possible to use a big bank and yet not pay any fees and it was actually pretty easy to do.  So while other people are moaning about paying their banks what are essentially voluntary fees, I'm financing an extra 12-pack of premium beer from the monthly savings.  Here's mud in your eye!