J. D. Moneysaver, Contributor
For this week’s column I’m going to get into some detail about chequing accounts and associated fees.
Types of Accounts
First thing, forget about the chequing and savings buttons on your debit card. It would have been far better if those buttons had been called “Account 1” and “Account 2”, because they don’t actually signify anything. You can hit savings and take money out of a chequing account or a credit line; it all depends on which accounts are connected to those buttons. Ask your bank which ones these signify.
The difference between the two types of accounts is this:
With a chequing account, you pay a flat monthly fee (anywhere from $3-$30). Depending on what monthly fee you pay, your bank sets a limit on how may transactions you can perform in a month, and for any transaction beyond that limit you incur a service charge of $0.70-$1. Paying a $12-$15 monthly fee will get you unlimited usage.
Savings accounts, on the other hand, have a different set of charges and are designed to help you keep money in your account.
So what exactly does the bank consider a “transaction”? It’s pretty simple really: it’s always free for you to deposit money, but any time you are withdrawing money (whether at an ATM, paying with your debit card, writing a cheque, using Paypal, etc.), that’s a transaction and can incur a charge.
As a postsecondary student, you get a pretty big discount: Banks will give you an account that costs around $10 per month and waive your monthly fee. However, remember your transaction limit. This is one place where so many students waste their money, by not being aware of and going over this transaction limit. If you want be that guy who uses his debit card to pay for everything (and making the rest of us wait in line while you take 3 minutes to buy a pack of gum), then don’t take the student discount, just pay for unlimited usage. And if the bank teller is trying to tell you about your fees, listen to him/her.
Here is an example of the kind of thing I deal with:Me: Sir, are you aware of the service fees you paid on your account last month? Customer: But I have a free student account. Me: A student account has no monthly fee, but you still have fees for usage. Last month you performed 60 transactions, and incurred a $40 charge. Customer: !!!! Me: And I can see that you are heading down the same path this month. You know, for $14 a month, you get unlimited usage. Why don’t you let me switch your plan now? It will only take a second. Customer: Ummmm… I’ll think about it.
More often than not, you won’t actually think about it. Then you rack up another $30 in unnecessary fees. Don’t be this person – save your money.