Which bank offers no monthly fees? Many of them. Here is a way to get decent return on your money and eliminate your everyday banking fees at the same time.
The key here is to maintain a minimum balance. Which bank you choose is up to you (most of the banks that I am familiar with offer similar deals). I am a Canadian and bank primarily at the Bank of Montreal. I am also a member of a credit union (join one if you are eligible – the savings can be tremendous). I am enrolled in their “Plus Plan”. The “Plus Plan” offers me 30 transactions per month (this includes debit transactions), cancelled cheque images, free traveller’s cheques, and a few other features for $8.50 per month. I am a ‘light’ banker. Most of what I buy is put onto my rewards credit card (either the CITI Mastercard or the VISA Dividend Card). This way I get an effective 1% discount on everything that I buy.
Using a debit card is not a great option, in my opinion, as you immediately surrender your cash no matter which bank you use. A credit card gives you a grace period (typically 21 to 28 days) that enables you to hold on to your money just a bit longer (thereby earning interest on it), and earn cash back with some cards, all at the same time. The only time I use my debit card is if I am low on cash and want to use the Cash Back option (thereby using participating vendors as a very convenient cash machine).
Back to the saving money on bank maintenance fees part. Most bank accounts that I know about offer a fee waiver if you maintain a minimum balance throughout the month. It doesn’t matter which bank you bank at – just ask at your branch or search for account options online. In any case, think of your minimum balance as earning an after-tax return for you no matter which bank you choose.
Here is what I mean. At the Bank of Montreal, I can waive my banking maintenance fee by maintaining a minimum monthly balance of $2000. The normal fee is $8.50 per month. $8.50 per month over twelve months is $102/year. If I divide $102 (my otherwise payable monthly fees) by $2000 this equals just over 5%. Where else can I get a risk-free after tax rate of return of 5%? A few places, but not many. It pays decently to maintain a minimum balance no matter which bank you choose (as long as they offer the fee waiver).
Let’s take a look at which banks offer similar rates of return for you maintaining a minimum balance. I have tried to find accounts most similar to my low banking needs profile (your needs may be different):
Maintenance Fees(yr) / Min. Monthly Balance = Rate of Return
Bank of America (MyAccessChecking) $144.00 $1500.00 9.6%
US Bank (Silver Checking) $ 83.40 $1500.00 5.56 %
Bank of Nova Scotia (Basic Chequing) $107.40 $2000.00 5.37%
Bank of Montreal (Plus Plan) $102.00 $2000.00 5.10%
This is just a brief illustration to show you no matter which bank you bank at, that it pays to evaluate your actual monthly needs (how many transactions do you actually do? Could you use a credit card instead for at least some of these transactions?). Once you understand your monthly transaction needs you then need to look at which bank offers you the best rate of return for maintaining a minimum balance (among many other various factors)? Some banks may be offering you a better rate on your mortgage or maybe they have waived other fees that you might pay. These factors must be considered in the overall picture. Looked at by themselves, however, which bank you choose should take everyday banking maintenance fees into account. You can earn a decent rate of return by keeping the minimum balance in your account depending on which bank you choose.
Now, I know some of you may be saying, “Well, banks can charge whatever they want to charge”. This is true, but there is competition for your business, and nothing stopping you from choosing which bank is the best bank for your needs. Shop around. Make sure that your bank is offering you the best possible package to meet your needs.
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Legal stuff: I am not a financial advisor. This post is for informational purposes only. Consult a professional advisor.
In summary, which bank you choose should be a reflection of your personal needs. Some banks offer a great rate of return (and waive their maintenance fees) simply because you maintain a minimum balance. Consider it.
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