Fees, fees, fees! Gosh I hate fees! I used to pay a lot more of them than I do now and I’m on a mission to eliminate any and all fees. I don’t like fees, and yes, yea I am cheap.
Things I used to do (and maybe you did too, or maybe this is till happening to you)
I used to pay a $2 account maintenance fee on my savings account with one of the Big 5 banks. In return I got nothing in interest and a monthly statement that told me how little I had saved that month, actually it was generally $0.
I used to pay $8.50 per month for a chequing account with one of the Big 5 banks, which didn’t even get me unlimited chequing! At one point I paid $12.95 a month for more transactions and other ‘benefits’ I didn’t need, use, or that were insufficient.
I used to pay $5 for occasional overdraft service, $5 per transaction that is. Great, so I thought, for that time when I forget my car insurance or when I get paid a day after a bunch of bills come out.
I used to sometimes pull money from my creditcard, which would cost me $1.50 per transaction. Sometimes I did it more than once in a month because I was stuck and didn’t know what else to do.
I also used to get NSF fees, rarely, but I did. I’ve probably had less than 5 in my life time but I have paid them nonetheless. I didn’t get hit with them because I let my account go for weeks or months but usually because I didn’t have money until the few days after a bill came out, or because I wrote a cheque and it was cashed too soon, then bounced. Ouch.
And finally, I used to pay $35 to my creditcard provider (also a Big 5 bank) for the ‘privilege’ of having my interest rate reduced from 18.5% to 11.4%. My records for anything prior to 2011 are not complete but from pulling out what I do have I estimated that in 2008 the fees I paid resembled something like this:
These are REAL numbers. On top of this I paid the interest on the balance on my creditcard which from mid 2006 to early 2009 averaged anywhere from $35 to $70 per month on a balance that averaged below $5,000. (That is $360 – $840 per year!) This means that when I had the least amount of income I was spending anywhere from $567 to $1,027 for my relatively small creditcard balance, one chequing and one savings account per year.
I’m not the only one which is why I am writing this post. See, it’s fine to pay these fees if you make enough…. I can get with the idea of trying to make more money instead of trying to cut small expenses like these but it’s not people with enough money that I see paying too many of these fees. It’s the guy at work, it’s my sister, it’s my friend that get stung while they have so little to begin with, making the poor poorer. Part of it is their own fault for not asking or caring, part of it is the banks for not being better banks.
I’ve paid hundreds of dollars in fees and have received nothing in return, craptastic service, staff that is less knowledgable on products than I am and zilch in interest for deposits. And I’m not the only one, after examining my 21-year old sisters finances she is very much in the same boat I was and is paying an overlimit fee of $35 on her creditcard about once every two months… (besides her stupid choices to get to that point) in addition to all the fees and interest I just wrote about. But until I pointed it out to her she didn’t realize she had a choice on how to deal with some of this.
I admit that much of the fees and interest I was charged were due to my own ignorance, just simply not knowing and not questioning; Why? Is there no better way? I paid off my creditcard in 2009 and I haven’t carried a balance since. Somehow, somewhere during 2008/2009 a lightbulb lit in my brain and I became better at being frugal and looking for the best deal, working systems to MY advantage.
I paid off my creditcard and haven’t paid interest in more than a year and a half, I don’t carry a balance and I sure as hell am not paying a bank to make a really crappy interest rate, slightly less crappy by dropping it from 19.5% to 12.4%. I save myself the headache and just don’t carry a balance.
I closed the savings account that had fees and opened accounts with online banks which not only offer BETTER interest rates, they’re also FREE. (Helloooo ING 🙂 ) I said screw you to paying fees for chequing accounts with very little benefits to me and started using a free online chequing account. My bank relented and told me that ‘oops, you had a promo with your mortgage offering free chequing for the life of your mortgage’ as I was about to walk out the door. I’m still not sure if I actually believe that, but I kept the account – now free- , and the card, just to be able to look at my mortgage balance dwindle as I prepay the balance.
I’ve eliminated all saving and chequing account fees and I actually earn a little interest on my savings. My bank pays ME for keeping my money, and not the other way around and I feel that’s how it should be. I pay enough in interest on my mortgage for them to keep my small amount of savings somewhat secure.
Eliminating more fees.
With bank fees mostly eliminated from my budget, hells yeah! The only ‘fee’ I pay now is $5 for another pack of $50 cheques, which in my books is very reasonable since the first packet was free and I haven’t used them up yet, I’m looking to eliminate more fees.
There’s more fees?
Yes, yes there are and they’re often hidden. MER’s on mutual funds, withdrawal fees on insurance premiums, foreign transaction conversion fees that are built into the transaction in a way that you’ll NEVER see them until you look at the fine print on the card issuers website OR peruse the booklet they sent you when you first opened the account and honestly… I don’t know many people that do read all the fine print. Fees are everywhere, they are how businesses make money and that’s okay. But it’s preferable if you can eliminate those fees by prepaying an account of choosing another way to pay, keeping your hard earned money, especially if like me, you’re not a high wage earner. The more money you can save, the better.
I can not at the moment increase my income so I’m always looking to cut down on things I don’t want to spend money on. I’ve set my sights on the $1.88 that I pay to my insurance company for the direct withdrawal of my car insurance premium, my house insurance premium AND my life insurance premium. (Also, separately my business insurance premiums) I believe I’m currently paying more than $66 a year to have my policy premiums debited from my account monthly instead of once every 6 months or once per year, they’re all debited separately and they won’t change that. I understand that these amounts may seem trivial but… Look at the math I did above there with bankfees, when you add all those little fees up that’s a boatload of cash! In 2008 my gross income was $12,000… the bankfees I calculated above ate up 5% of my income.
Here’s a plan
My plan to eliminate more service charges is pretty simple, although it won’t be painless. I’ve set up an automatic transfer from my chequing to my general savings account that totals the amount of my home insurance premium every month ($40-something) This means I’m essentially paying double the premium for the next 6 months because I’m still paying the monthly premium in addition to saving for next year’s premium. When my policy comes up for renewal I’ll be able to just write a cheque for the total and pay it all at once. (Also freeing up cashflow in my monthly budget!)
This means saving more money on top of the money I’m already saving to add to my emergency fund and for my future. I’m not going to tell you this is easy, it means I have to save, save, save. But it is worth it? Yes because eventually you start to see the forest through the trees. Perhaps next year I will be able to save up for my car insurance renewal too.
Eventually you will kill your creditcard debt, eventually you pay off your car, eventually you pay off the loan to your mother’s cousin’s uncle’s brother and eventually too, you will have an emergency fund. It takes hard work and sticking with it, but eventually… we’ll make it. It isn’t easy but it’s totally worth it.