Don’t you love when personal finance bloggers mess up the basics?
My old school ING Direct banking card was going to expire on January 1st, 2013. Instead of ordering my new card in advance or looking through my documents to find the card they had previously sent me, I chose to do nothing. Then my card expired and I was stuck without a debit card. That wouldn’t be a problem for an older person. For me it was a huge problem because I use my debit or credit card for everything. So I was stuck using my old debit card from the local bank where I have an account just to cash in checks.
Well guess what happened? I got hit with their crazy “account usage” fees or whatever they call them. I went in recently to cash in a check and ask about their account options. I naturally wanted to see what they would say about the unlimited option because I use my card far too frequently. I was told that it would cost either $10/month or I had to keep a balance of $2,500 to get this account for free.
I always sing the praises of online banking accounts here for a reason. They’re awesome and they’re totally free. What’s better than that?
Why would I keep $2,500 in my checking account?
That’s what I asked the teller. It makes absolutely no sense for me to keep that much money in an account that earns no interest just to have unlimited access to the money that I worked for. I’m not sure about you, but I believe that there are many better ways to invest money.
The teller didn’t care too much because she doesn’t make the rules and she probably has a free account. I was just shocked that people were accepting this.
And since I always tell you guys that spending money on banking is a waste of money, today I wanted to show you!
How much money can you really save with an online checking account?
The other problem with a standard checking account is the amount of money that you waste. I don’t want to dwell on saving pocket change, but it makes sense to run the numbers.
Let’s check out the latte factor calculator below. You can play around with the numbers as you wish.
For this example, I assumed that you would have to pay your standard bank $10/month for unlimited transactions. I then put in a 2% interest rate (very low) for where I would put that money. I finally put in 10 years because that should lead most of us well into our 30s.
What did the calculations show me? That you could lose $1,327.20 from foregone interest and the money spent on STORING YOUR MONEY SOMEWHERE! That’s insane! I want you to play around with the numbers to see how much money you’re wasting just to access your own money.
Just for fun, let’s get a little creative with the numbers. I tried to see what would happen to my money over my lifetime (another 80 years). I also used the interest rate of 8%, where it could be invested long term instead of current pathetic rates.
What did the results show for my lifetime savings by cutting out banking fees? This would bring the real price-tag of what you are spending your money on to $882,295.87. That’s a lot of money if you asked me!
The amount of money that you have to spend over time on accessing your own money will scare you. The good news is that there’s a solution.
Where can you keep your money for free?
It’s time that you took a few minutes out of your schedule to move your money to an online banking account. You already spend all day on Facebook. Why not take care of your finances online? You can sign up with Ally Bank right now. You don’t have to worry about counting your transaction to ensure that you don’t go over your limit. It’s your money. Access it five times a day if you want.
There’s also another option, the bank that I’ve been using.
If you join ING Direct, you get $50 for free. You can use your debit account whenever you want and not stress about getting charged to spend your own money. Hopefully you’re smarter than me and follow-up on changes to your debit card.
Why waste money? As you can see by playing around with the numbers, it’s a shame to throw any money away. At least spending a few bucks on drinks will lead to a few great stories. But spending money to hold your money somewhere is a total waste. You owe it to yourself to open an online checking account.
{ 2 comments… read them below or add one }
Interesting. I hold a BMO chequing account, but convieniently I have a grandfathered account, so all I need to hold is $1500 to have free banking. Yes, still paying the bank I guess, but because I had my mortgage, investment account, brokerage account with them too, I could link all of them. This is the advantage for me. All of my accounts at 1 access points, and free transfers accross accounts – any issues, all I need to do is speak to 1 real person to have my sissues solved. That’s my main reason for continuing to pay them the $1500×8% ($120) per year. Small price to pay for simplicity IMO.
Thanks for your comment Phil. I’m just curious though, why should you have to pay anything just to have your accounts linked? It’s your money. They should be happy to link your accounts. Not only are you spending $120 per year, but you’ve limited your options with the $1,500 just sitting there. Think about the opportunity cost. And let’s be honest, how often do you need to talk to a real person in person? Every form of communication could be done through phone. Just saying.