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How to cut your debit cards fees
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By Robb Engen-The Toronto Star-
I formed a few bad habits back in my university days, but the one that stuck with me the longest was my addiction to using my debit card. My wife and I used our debit cards for everything while we went to school, and this addiction ended up costing us more than $300 a year in chequing account fees.
It’s easy to pinpoint how this habit starts to form. Free student chequing accounts have been around for years and include a higher number of transactions than a regular chequing account (25 to 30 free debit transactions a month). Four years of unlimited debit use was certainly long enough to modify our spending habits.
Once we finished school, reality set in and we lost our free student banking privileges. Based on our account activity, the TD Bank recommended we switch to their Infinity chequing account, which would cost $12.95 a month and gave us unlimited debit transactions.
We lived paycheque to paycheque during our first few years out of school and it didn’t occur to me how much money we were wasting in fees. We paid hundreds of dollars a year just for the privilege of spending our own money.
I took control and to keep my monthly debit transactions in check, I started using a rewards credit card for everyday spending. I switched from the Infinity account to the Value account, which included only 10 transactions and cost $3.95 a month.
I made sure to always carry the $1,000 minimum in my chequing account to waive the account fee entirely. The minimum amount rose to $1,500 on August 1.
Many Canadians are in the same boat. We love using debit cards to pay for any purchase, big or small. Interac Direct Payment was launched in 1994, and in six years debit cards had replaced cash as our primary payment method.
There are certainly benefits to using a debit card. Unlike a credit card, you can’t spend what you don’t have. You can only spend what is already in your account. Since the debit is immediate, your account balance is always up to date.
Debit cards are also useful for shopping or for services where credit cards are not accepted. Best of all, there is no bill at the end of the month. You are able to keep track of your account balance at any time. The service is convenient, fast, safe and reliable, with less risk of loss or theft of cash. It is also faster than writing a cheque.
So how do we curb our debit card addiction and avoid paying unnecessary bank fees?
1. Choose the right account: The big banks offer tiered chequing account plans based on the number of transactions you make in a month, but they will waive the monthly fee if you carry a minimum balance. The more transactions you require, the larger the balance you need to carry to waive the fees. A good rule is to limit your transactions to 10 to 15 a month and always carry at least $1,000 balance in your chequing account.
2. Negotiate the fees: At RBC, for example, if you have a chequing account and two or more eligible RBC products, you could bank for free or receive a reduction in banking fees. Even if your bank doesn’t offer an official multi-product discount policy, it can’t hurt to ask for one after renewing your mortgage, opening up a line of credit or credit card account.
3 Switch to an online no fee account: There aren’t many perks for being a loyal customer anymore, so the days of customers holding their bank accounts, investment accounts and mortgage all with the same institution are coming to an end. People are always looking for a better deal, and many folks have already discovered the benefits of switching to an online bank that offers a no-fee chequing account. With no minimum balance to worry about and no restrictions on the number of bill payments and transactions made each month, it’s amazing that more people haven’t switched to an online account for their daily banking.
4. Limit your transactions: Do you really need to buy a $2 coffee with your debit card? You should always carry a bit of cash to cover your small indulgences. Consider using a rewards credit card for your remaining purchases and monthly bill payments. As long as you pay off your balance in full every month you can earn hundreds of dollars a year by using a rewards card rather than paying hundreds of dollars a year in bank fees.
We need to control our debit card addiction and stop being content spending hundreds of dollars a year in bank fees. There are plenty of options out there for customers to limit their bank fees, pay no fees, or to actually earn rewards on their everyday spending. What will you choose?
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