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Should you switch to a free or low cost bank account? PERSONAL FINANCE

When I opened my main account about six jobs and two children ago, I chose the bank because it had a branch in the building where I worked. Back then I visited the bank (and used their ATMs) more often and paid for things like coffee and lunch with the money in my wallet.

But now I type more often with my debit card and hardly ever visit a branch, Fortunately, I have an unlimited transaction account so my fees have not skyrocketed. But if I screw it up and get oversubscribed, the punishments are tough. Sometimes I wonder if my checking account package is the best option for me or if there is now a more competitive offer that better suits my needs. And I’m not alone.

Most of us use our bank accounts to fix it and forget it. They choose them for reasons that suit us at that time and rarely think about them. However, if you transfer this part of our financial picture to the autopilot, you may have to spend a lot more on fees than necessary, which can potentially result in thousands of dollars over the course of your life.

“People do a lot of research on some aspects of their financial lives, not others,” said Jennifer McDonald, chief operating officer of Mylo Financial Technologies, a Canadian investment app. “We’ll see how they’re looking for the best flight deals for a trip they’ll take once a year, but they’re not looking at how their banking relationships are structured.”

So it’s worth taking a second look at the monthly or per-transaction bank fees, McDonald says. Your bank can tell you how many transactions you make in a typical month, as well as the current account packages that may have changed since you last bought a new account. Alternatively, you can check your bank statements yourself and then view the account offers online. In any case, you can be sure that you have the right accounts for you, she says.

When deciding whether an account with low or no monthly fees is suitable for you or whether you should pay more for unlimited transactions, consider.


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Weighing the minimum credit requirements against interest / investment income

While the big banks have more options and frills – like For example, stationary locations with people you can talk to about your financial needs – most banks charge substantial monthly fees on their checking accounts to pay for these services. However, some waive these fees if you hold a sufficiently high minimum balance because they have a good stack of cash to borrow – and charge borrowers a higher interest rate than they pay you on your deposits.

For example, TD Canada Trust waives the $ 15.95 monthly fee Unlimited checking account with a minimum balance of $ 4,000 and will do the same for its price All inclusive checking account (This costs $ 29.95 a month, but offers additional benefits such as an annual fee discount for select TD credit cards.) If you hold a minimum balance of $ 5,000.

This can be a good compromise for those who need unlimited transactions in their account and want to pay less fees. On the other hand, others may prefer to put these four-figure amounts in a high-yield savings account or investment product that offers a return on their money – as opposed to the 0% interest that TD pays on their checking accounts.

Use cash or a credit card to minimize monthly account transactions

The big banks also offer some inexpensive account options, but with more limited transactions. RBC’s daily bank accountFor example, it only costs $ 4 a month and includes 12 debit transactions. This doesn’t work if you like tapping from your checking account for your daily caffeine fix. However, if you don’t mind working with cash, or if you use a credit card for daily transactions, this type of account could work for you.

In fact, many people prefer to use their credit card every time they buy groceries, a transit pass, or a flat white – especially when collecting points for travel or other rewards. There is one important limitation, however, says McDonald. This approach only works if you have no credit on your credit card from month to month and there are expensive interest fees. Instead, you can conveniently pay your bill in full at any due date.

Consider a purely online bank

If you are familiar with branchless banking, the cheapest accounts are offered by online institutions like Tangerine (the online branch of Scotiabank) and Simplii Financial (owned by CIBC).

Both offer checking accounts with no monthly fees and unlimited transactions, including free Interac-E transfers.

Most bankless banks now have partnerships with one of the larger banks that do not have free access to their ATMs. This was previously a disadvantage when setting up a purely online institution.

Pay attention to fees on multiple accounts

It can be helpful to save some money in an account that is less accessible to you than the checking and savings accounts associated with the main bank card in your wallet.

“We find that people tend to organize money with mental envelopes,” says McDonald. “It can be valuable to have a little bit of money that is out of sight and understanding and that grows over time.”

Of course, if there are fees associated with each of these accounts, the total cost quickly adds up. “In general, it doesn’t make sense to have a lot of banking relationships for your major transactional bank accounts,” she warns.

Many of us also have banking relationships that we need to clean up and close because the annual fees are gone with a small balance remaining, McDonald says. An account that has not been used for 12 months or longer may even incur a fee of around $ 20 a year.

Leave a pillow in your account to avoid NSF fees

Even accounts with low and no fees typically charge insufficient funds (NSF) if your balance falls into the negative. It’s a major blow to many Canadians who don’t have enough bank accounts (or overdrafts) between paychecks and are exposed to unexpected NSF fees, McDonald says. “These are usually in the $ 25 to $ 45 range,” she says.

To avoid these unnecessary costs, McDonald recommends building one Savings buffer to keep your account above a certain threshold. “Don’t risk being stuck with the surprises that happen from time to time if you live a little too close to the line,” she says.


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