Banking Your Money
Once upon a time, the banks wanted your business so badly they actually gave you a free toaster as an incentive to make a deposit. That’s a time few remember — a tale told by elders to amuse the younger generation.
It’s one thing to stop giving incentives; it’s quite another to start charging you for the privilege of depositing your money. Yet that’s just what’s around the corner — the end of free checking, free cashier’s checks and the pittance of interest you might be getting if you leave a balance in your checking account. In its place, you could find yourself paying fees for everything from “inactivity” to debit transactions. You’ll have to consider a complex series of trade-offs in order to stash your money safely and conveniently in a checking account.
For example, you could be required to keep a significant balance in your checking account to avoid a $15 monthly fee. That means “hiding” your true balance from yourself with an extra $500 or more sitting in an account that doesn’t earn interest. Or you might have to have your paycheck or Social Security check direct-deposited to avoid a monthly fee. Or consolidate your bills by paying your utilities using your credit card — so you only have one or two large checks to write every month — in order to avoid fees for excess checks. Depending on your bank, direct debit of mortgage payments or car loan payments could keep you under the fee-paying transaction limit.
The point is that you’ll have to pay attention and be creative to save money on something you used to take for
The banks are just getting even for the recent laws that limit overdraft and late fees on checking and credit cards. It’s been estimated that it costs from $250 to $300 a year for a banking institution to maintain your account. And if the spendthrifts aren’t going to pay the extra costs they incur, then the charges will be spread to those who scrupulously avoid overdrafts, use debit cards and always pay their credit-card bills on time — and even in full.
Credit-card issuers are seeing charge-offs in the double-digit range — and someone has to make up for the billions that are written off amidst soaring consumer bankruptcies. Now those substantial costs are being passed along to all of us.
The end of “free checking” is only the first step. The next step is to do away with paper completely — or pay a fee. I’ve long suspected that once they got all of us paying bills online, they’d start charging for that service, too! We’re saving them money if they don’t have to process paper checks, so we should actually be rewarded. But this is not about reason — it’s about recouping the costs of doing business.
Is there anything you can do to fight back against these charges? Here are a few suggestions:
• Consider credit unions or community banks. You may have overlooked these smaller insured institutions, which have the capability of being more flexible and offering personal service. The trade-off for lower fees or free checking is that they may not have a wide network of ATMs. If you make frequent withdrawals, the fees could cost you more each month than a charge for maintaining a checking account.
• Use a money market mutual fund. Most of these accounts are invested in short-term government securities, so they are very nearly as safe as bank money market deposit accounts. They allow you to write a limited number of checks each month at no cost. So you can charge all your smaller purchases on your credit card, accumulate miles or points and then pay the bill from your account. Be aware of the number of checks allowed each month and the minimum dollar amount per check.
• Use your debit card. Right now, banks are only considering a charge every time you use your debit card. But they’re fighting against proposed financial reforms that would cut the merchant fees they get when you use your debit card. If those fees are cut, banks may start charging you for using your card. But in the meantime, debit is efficient and a good way to avoid writing paper checks.
• Roll over a portion of your IRA. You probably have some of your IRA in a conservative money market account with your mutual fund company. If you roll over just that portion of your IRA to a bank CD IRA, you may have a large enough balance of deposits at your bank to avoid fees completely.
What’s really important now is that you read all those fine print notices that come in your billing statement. They’re hoping to slide the new fees past you — and hoping that you’ll think it’s too complicated to change things like automatic payments or direct deposits so you won’t move your account. But if enough of us complain, you can be sure that some creative bank marketing director will create an ad hailing the return of “free checking” to attract deposits. Don’t count on any toasters, though.