With the proliferation of high interest savings accounts, the chequing account is looking more and more unattractive. With zero to low interest and tons of fees (I cringe at the reports that say the average person pays over $200 a year in fees), you’re sometimes better off keeping cash under your mattress. Even the chequing account of all chequing accounts (at Coast Capital Savings) still has some drawbacks. For example, it gives you 0% interest and you have to pay for cheques after your first 10.
The only reason why I keep a chequing account is so that I can deposit the occasional foreign currency cheque with a teller and so that I can write cheques (although some hybrid accounts let you write cheques). However, I try to keep as little money as possible in my chequing account at all times.
Is it possible to experience high interest, no fees, and still have access to your money when you need it? No single account satisfies this, but as with most things in life, you can tweak your habits to improve you situation. Most day-to-day fees and hassles involve debit card and ATM transactions, cheques, bill payments, and transfers. Here are some simple tips that can help you to address these issues to get the most out of your bank accounts.
Use credit cards as much as possible
Stores would probably prefer that you use cash, but to the consumer, using a credit card helps you in three ways. First of all, you can perform unlimited credit card transactions (well, as long as you have the money for it). With many debit cards, your chequing account only allows you a certain number of transactions per month. Second, many credit cards have no annual fee and give you rewards like cash back or points to buy groceries and such. Third, you only have to pay off your credit card once a month. This means that you can continue to earn interest on money that sits in your bank account for up to two months before you have to pay off your credit card bill without penalty.
Of course, you have to be careful with credit cards. If you carry debt on the card, then obviously you are being charged interest. Also, if you have trouble spending money that you don’t have, credit cards exaggerate the problem. But keep track of your purchases and you should have no problem.
Pay your bills online or via telephone
Often, paying your bills online or via telephone is free. You don’t need to write a cheque, you don’t need to mail anything, and you don’t need to drive anything. In addition, online of phone payments are often posted the next day, so you don’t have to wait the week or more with other types of payments.
With PayPal, once you have linked your bank account to your PayPal account, you can pay people via “pre-authorized payments”. This is different than debit card payments because there are often chequing account limits and fees on debit card transactions but none on pre-authorized payments (although you should check this with your bank).
Although PayPal became big because of eBay, you can use PayPal to pay for items and subscriptions on an increasing number of websites.
If you and your friends have PayPal accounts of the “Personal” type, you can pay each other instantly and without fees via pre-authorized payments. This lessens your need to carry around as much cash (thus lowering the need to go to an ATM) or write cheques.
Try and get your friends to open accounts with the same bank
Often, transfers within the same bank are unlimited and free. I have a friend that I’m constantly lending and owing money to. We pay each other back instantly and without fees through online banking because we both have accounts with the same bank.
Carry some cash around and don’t use other networks’ ATMs!
ATM network fees are a pain. But really, just find an ATM that is part of your bank’s network! For example, if you have an account with HSBC or any of the credit unions, you can use ATMs on any other HSBC or credit union THE EXCHANGE Network (I think it’s officially capitalized) without paying any fees. As another example, if you have an account with PC Financial, you can use any CIBC bank machine without paying network fees.
And if you have at least a couple hundred dollars in your chequing account, whenever you withdraw cash, just try and withdraw larger amounts at a time (like $200 instead of $60). This might sound simple too simplistic, but I used to always withdraw the smallest amount needed; it made a huge difference to withdraw slightly higher amounts in order to decrease the frequency of trips to the ATM.
Don’t be afraid of opening multiple accounts at different banks
Many chequing accounts that have no minimum balance simply limit the number of transactions you can do. So if you have $200, you can just keep $100 in one account and $100 in another account and thus get double the number of allowed transactions. And if you have accounts at different banks, this means that you have probably increased the number of ATMs you can access without incurring network fees.
Pick a high interest savings account over short-term GICs and pair a high interest savings account with a chequing account in the same bank
This goal of this tip is to help you earn a high rate on your money while keeping the money accessible.
High interest savings account rates are comparable to short-term GIC rates, but of course you don’t have to lock your money in. If you keep as much money as possible in a high interest savings account and have a chequing account with the same bank, you can transfer money back and forth as many times as you want between those accounts either instantly or within 1 business day on an as-needed basis. So if you know you need to write a cheque on a certain date, simply transfer your money last-minute from your high interest savings account to your chequing account. This trades off the additional simple step in order to access your money for chequing needs with the ability to earn a higher rate on your money.