I’ve banked with TD my whole life but while I consider myself to be a fairly loyal customer that doesn’t mean I’ll blindly accept blatant fee grabs without fighting back.
That’s exactly what happened two years ago when the big green bank announced changes to its chequing account fees and minimum balances. Their basic chequing account, which I used, charged $3.95 per month but waived the fee as long as you maintained a $1,500 balance. That was about to increase to $2,000 and I had enough.
I sent an email to an advisor at my local branch and said I’d like to close my account ahead of these changes and asked him about moving some of my automatic withdrawals to another bank.
He replied back right away with an offer too good to pass up:
“Hi Robb, I can help you with this. I would need a void cheque and some signatures, so we would need to book an appointment. If you are interested, though, I will change your chequing account to a student account. It’s a free basic account, includes 25 transactions and no minimum balance, and this way you won’t have the hassle of making a bunch of changes to any direct debits you have going out.”
Well, needless to say, I jumped at the offer and today continue to bank fee-free with TD. It’s a win for me, of course, but also for the bank as they get to keep all of my business that includes banking, a mortgage, line of credit, plus RRSP, TFSA, and RESP accounts.
A chequing account might be the linchpin that holds all of your banking needs in one place. Let that go, and it becomes easier to move other aspects of your banking as well.
So, how can you comfortably bank for free? Here are some options I recommend to avoid monthly bank fees:
Unlimited chequing account, high minimum balance
If you’re the type of person that uses a debit card for the majority of your purchases, has a lot of automatic bill payments, and requires a full-service bank for in-branch transactions then you’ll have to bite the bullet and opt for a full service chequing account.
Unlimited transactions at most banks will cost about $14.95 per month and you’ll need a high minimum balance to waive the fees. You’ll have to decide if having $5,000 sitting around in a chequing account is worth it to get unlimited banking.
Basic chequing account, still a minimum balance
The big banks were volun-told by the federal government to offer low cost accounts to consumers for $4 per month. These accounts offer bare minimum services, 10-12 transactions per month, and some will waive the monthly fee provided you maintain a minimum balance.
Look for terms like ‘basic’ or ‘minimum’ accounts, as they’re not well advertised by the banks and in some cases buried well below other more profitable banking options online. Here’s what’s highlighted at the top of TD’s chequing account page:
And then waaaay down at the bottom of the page you’ll find some other options:
A minimum or basic account is not a bad choice for those who use cash or a credit card for the majority of their transactions but still require the use of a full-service branch from time-to-time.
Combo: No-fee online bank + Basic chequing account at big bank
This is the sweet spot for those that have broader banking needs but don’t want to pay monthly bank fees or maintain a high(er) minimum monthly balance.
Open a no-fee chequing account at an online bank such as Tangerine or PC Financial, or at a local credit union, and pair it with a basic chequing account at a big bank, while maintaining the minimum balance to waive any monthly fees.
With the free-banking combo you can use the free account for any transactions such as bill payments, debit purchases, email money transfers (free with Tangerine) and cheque payments (free with PC Financial). Then you still have access to a full-service branch to get a bank draft, cash a cheque without a long hold, and have a wider network of ATM’s from which to choose.
I did this for several years with a Tangerine chequing account alongside my basic TD account. I got fed up when the minimum balance kept increasing (from $1,000 to $1,500 to $2,000).
No-fee online bank or credit union
Let’s face it, technology has changed the way we bank and unless you have complicated banking needs most customers can pretty much get the same level of service from an online bank or credit union as they can at a full-service bank.
The biggest difference: no fees. I’ve received countless emails from readers who have banked at PC Financial for over a decade and rarely paid a fee or ran into an issue where the no-fee bank couldn’t meet their needs. Plus, PC Points!
Credit Unions are also becoming more competitive and offering low or no-fee accounts to attract your business.
It’s an annual ritual for some Canadians to call up their telecom provider and negotiate a better deal on their cable, internet, or phone charges. We should be doing the same for our banking. You always see awesome deals and promotions to attract new customers. What about an incentive for their existing customers? Since the bank is not going to just freely offer everyone a better deal, it’s up to you to ask (or demand!) one.
Related: Want a better deal? Just ask.
Banks continue to make it difficult for customers to avoid monthly bank fees by increasing the minimum balance required or eliminating that option altogether.
You might not luck into a free full service bank account like I did but you’ll increase your odds if you have a back-up plan. There’s no harm in opening a no-fee bank account online and trying it out for a few months. Then, if you like what you see, go to your main bank with offer in-hand and threaten to close your account.
Keep in mind that the only way this negotiating tactic will work is if you’re actually willing to walk away. For some, it’s too much hassle to change their banking, but if you’re serious about saving money on bank fees you need to have an exit plan.
Readers: How do you avoid monthly bank fees?
Financial author David Bach introduced the Latte Factor as a metaphor for all the small indulgences we regularly treat ourselves to that add up over time. It wasn’t meant to single-out Starbucks as the main culprit for our financial woes, but somehow millennials feel the need to stand up for their beloved coffeehouse and defend their right to buy an obnoxious drink whenever they damn well please.
Helaine Olen (not a millennial) made people feel good about buying lattes again when, in her best selling book, Pound Foolish, she explained how the Latte Factor is a lie and buying coffee every day is not why you’re in debt. No, instead it’s the big things: housing, transportation, health care (in the U.S.) that are more difficult to cut back on.
More recently, this author whined about how millennials were being judged on their spending choices, criticizing a survey that revealed millennials spend more on coffee than on saving for retirement:
“Millennials are continually being accused of wasting money on supposedly frivolous things. In October, an Australian man named Bernard Salt wrote that he had had enough of seeing young people ordering “smashed avocado with crumbled feta on five-grain toasted bread at $22 a pop and more. Twenty-two dollars several times a week could go towards a deposit on a house,” wrote Salt.
According to my calculation, if millennials were to abstain from their avocado toast three times a week, they’d save around $3,432 per year. Which isn’t all that much, in reality.”
Oh really? And in what reality is $3,432 not that much money? According to the author, life is unfair and millennials should just give up on the idea of owning a home, or saving for retirement, so just let them have their damn latte and $22 toast.
My take on the Latte Factor
“Take care of the pence, and the pounds will take care of themselves.”
The Latte Factor is not about Starbucks. It’s not about denying you the odd frivolous treat if you enjoy it. It’s about mindless, habitual spending that squanders your discretionary income and hurts your ability to save for those bigger goals.
But, at the risk of offending an entire generation, here’s what’s really going on: If you’re buying coffee every day, or ordering $22 toast several times a week, maybe you’re just lazy. You’re lazy, and you don’t know how to cook. You’re too lazy to brew your own coffee at home and cook for yourself.
(It’s not just you. I did it, too.)
How hard is it to make a cup of coffee? Oh, you don’t have time in the morning? Get a programmable coffeemaker, make it before you go to bed and set the timer so it’s ready when you wake up. Or maybe, I don’t know, wake up earlier.
There’s a Starbucks and a Tim Horton’s on the University campus where I work and every morning there are dozens and dozens of students, faculty, and staff lined up to get their coffee fix. That is mindless habitual spending. It’s different than enjoying a Grande, Iced, Sugar-Free, Vanilla Latte With Soy Milk once a week at Starbucks.
Buying lunch every single day. That’s mindless habitual spending. That’s the Latte Factor. It’s different than enjoying an expensive charcuterie board with your partner once in a while.
Yes, we need to get the big decisions right. But those aren’t daily decisions. Don’t buy too much house. Shop around for the best mortgage rate. Spend a reasonable amount on a car and resist the urge to upgrade every 2-3 years. Invest in a low-cost, broadly diversified portfolio and don’t trade too often.
By the way, these things aren’t mutually exclusive. You can make smart choices on the big things in life while also keeping an eye on your daily spending.
The Latte Factor is about how your daily habits shape your financial future. It’s not an attack on your irregular indulgences. So go out and enjoy your fancy drink. Just don’t lose sight of the fact that small mindless purchases can turn into big money leaks over time.