April 1, 2019

Budgeting for Bank Fees

It is the smaller items that can make the difference in our budgets but these are often dismissed or ignored. If you haven’t looked at your bank, credit card or investment statement recently, you should do so as bank fees are increasingly expensive and difficult to avoid. Here are 5 tips to reduce or eliminate bank fees in your budget.

  1. Picking the type of account that meets your needs. It is worth reviewing the type of transactions you use prior to obtaining a new bank account so that you can determine what features you require. If you frequently use the ATM or debit for your transactions, you will need an account that allows for multiple transactions whereas if you just let your money sit with minimal activity, you may be able to use a savings account and obtain interest on the balance. You may also be eligible for a low-cost account for youth, seniors, etc. Financial Agency of Canada has an online tool to assist in choosing a bank account suited to your lifestyle. https://itools-ioutils.fcac-acfc.gc.ca/ACT-OCC/SearchFilter-eng.aspx
  2. Maintaining a minimum balance. Many banks will reduce or waive their monthly bank fees where a minimum balance is maintained in the account. This balance will vary but can be range from $3,000 to $4,000 for the major banks. The decision to hold a minimum balance should be reviewed when you are depositing to savings.   If you have limited savings, the interest earned from depositing the funds to your savings account may be less than the bank fees you would incur on your chequing account.
  3. Avoid returned items/NSF Fees. Returned items are costly at approximately $45 per returned payment and $10 per returned deposit. Options to avoid a returned item include maintaining a minimum balance, keeping a register of your transactions, checking your balance before withdrawals, and setting up text or email alerts to notify you when you reach a certain threshold. An overdraft protection plan can be considered but comes at a cost which is only slightly less than a returned item.
  4. Avoid ATMs that are not part of your bank network. The ATM that is conveniently located in a convenience store may result in your paying a fee to the ATM provider and another fee to your bank. Consider planning your withdrawals ahead of time or making a purchase at a grocery store or other retailer and requesting cash back to avoid these extra charges.
  5. Review your banking needs and accounts periodically. Fees are increasing both in amount and type of transactions charged. Banks review their fees frequently and so should you. Fees for paper statements, exceeding your permitted transactions, foreign transactions, lost cards, inactive account, etc. may be avoided by finding the account that suits your current lifestyle. A periodic review of your accounts may help you identify these extra fees and act on them.

Although this blog is written for the individual budget, it is equally important for a small business where bank fees are higher. The reduction of the bank fees may lead to an improvement in your profit.

 

This post was written by Debora Kwasnicky of D. Kwasnicky & Associates Inc. for CAIRP

Debora Kwasnicky

Debora has been actively practicing as a Licensed Insolvency Trustee since June 1997. She began her career with a national insolvency firm in 1984, attended university while working until her final year, returned to article to obtain her CA designation (now CPA, CA) and her trustee license before leaving in 2006 to open her own boutique firm. Her experience has been in various industries including construction, forestry, finance, retail and high tech. She currently focuses her practice on individuals and small businesses.