OPINION Sep 24, 2019 by Gregory Cawsey Guelph Mercury
Saving a few cents a litre on gas doesn't matter when you're paying more on your bank transaction fees, writes Greg Cawsey.
“Hands in my pockets” was the catchphrase for a commercial a few years back that reminded us how bank fees can eat away at our savings. It was appropriate because it aptly described how banks have easy access to our cherished cash. Financial institutions are one of the few places that send you a bill (your bank statement) after they have already taken the funds out of your account.
Some of us will comparison shop for days to make sure we are getting a “good” deal — or drive across town to save a few cents a litre while filling up. Seeing the money leave our hands has an impact. When your money leaves out the back door, we tend not to focus on that — but we should. Service fees are a very profitable part of the financial industry. These small charges add up quickly and can eat way away at your financial estate.
When I was in first year at university, my dad told me to avoid carrying a large amount of cash around, for fear I might lose it. It was good advice, but it meant that I headed to the bank machine — all the time. The bank on campus was not the same one I used back home, so I was dinged an ATM service fee every time. “Cheating on your bank,” as this fee has been named, can cost you on average $1.25 each time. Not much, but they can add up. When I got home that year, I just happened to go over my bank statements that were mailed to my parents’ house while I was away.
I started to add up all the fees. I was shocked to find the ATM charges alone were over $90! Now imagine, instead of getting your statement from the bank, you were sent a bill to pay for your service charges. Chances are you would pay (sorry) closer attention to the fees being deducted from your account.
So what can you do to avoid contributing to the banks’ record profits? First off, as a student, make sure you have a no-fee bank account. All individuals can look to see if they are in the best account throughout various stages of life by checking out the Account Selector Tool from the Financial Consumer Agency of Canada.
When you are younger you should be able to easily keep track of what’s in your bank account and be financially organized. Are you?
Would you bet your bank balance if someone asked how much you had in the bank?
How close to it would you be?
I don’t expect people to know their account balance to the penny, but I am shocked when friends are surprised by what is in their account when they get their balance at the ATM.
If you are having trouble now keeping up with what is in your account, what are you going to do when account activity really starts to take off with the increased number of transactions as you get older?
Don’t become one of the many Canadians who bounce cheques each year and are charged a hefty service fee, of upwards of $40, for not having sufficient funds in their account to cover a cheque they wrote.
Some other banking tips to keep in mind:
• If you move or head off to school, don’t do what I did. Switch banks if most of your withdrawals are going to be using a another bank’s ATM.
• Review your bank statement as you would your cellphone bill. Make sure that it doesn’t contain any errors. Bank errors do happen, but unlike the board game Monopoly, they are not always in your favour.
• Interest paid on the balance of your account, is usually calculated on the lowest balance for the period. With that in mind, always deposit before you withdraw your funds, to keep the highest balance to maximize your interest.
• More retail stores are charging fees for using debit cards for transactions less than $5. Avoid these fees by paying cash or avoiding these retailers altogether.
Staying on top of your banking does require some diligence, but doing so will go a long way in keeping the bank’s hand out of your pocket.
Gregory Cawsey is the Director of business and financial literacy education at John F. Ross CVI. He can be contacted gregcawsey.com.