Save The Fees

A lot of people pay good money for stuff they can get for free, or for stuff they use without giving a second thought to the cost.

In a world where the average house price is $365,000, which results in a monthly mortgage payment of about $1,900 (assuming 10% down and 25-year amortization at 5%) who would blink twice at dropping $15 for your credit report so you can check to see if you’re mortgage-worthy. But you shouldn’t. You’re allowed to check your credit report to see what information financial institutions are sharing about your credit history for free if you write in. So plan ahead and write in.

Here’s another fee that makes me scratch my head: annual credit card fees. Banks want you to use their credit card so they can make millions on transaction fees, but you should pay for the card too? Really? With free cards a dime a dozen, who thinks it’s a good idea to drop $75-$120 for features you may only occasionally use? Hey, if you’re charging up a storm and paying your balance off in full every month, you may make a premium card pay. Carrying a balance? You’re a dope.

Then there are the fees for credit insurance: credit card balance protection, mortgage life insurance and the like. You do know that those “insurance” policies have not been underwritten yet and can be declined later if something untoward pops up? And you do know that you’re paying way more in premiums than if you went out and got private term life insurance to cover your butt? Nuff said.

Cancellation fees are a big money-producer for cell phone and cable companies. Cancel a contract before the end of its term and you’ll flush hundreds of dollars down the toilet. That’s just bad planning, either when you took the contract or now that you’re thinking about dumping it. Think of a cancellation fee is really a “stupid tax.” Still willing to pay it?

One of my favourite “You’re-a-Jackass” fees is the one people routinely pay because they can’t plan ahead or be bothered to walk down the block: the ATM fee.  Folks routinely fork over $4 for a $20 withdrawal. Hey, I’ve seen the bank statements! And as for the non-bank cash machines, which will cost you up to $6 in fees, that should leave you braying.

31 Responses to “Save The Fees”

  1. The word “insurance” of any kind screams extortion to me every time I hear it. I’ll be ditching my mortgage life insurance.

    Thanks for this information and many articles you provide, Gail.

  2. The ATM fee is something I absolutely refuse to pay. I will just do without if my bank is not close by.

  3. Can you do an article on insurance? ie/ replacement life insurance for your mortgage. Where to get it, how much coverage to have, etc. Also, what about disability insurance? My spouse and I both work in the construction industry, so this is necessary for us, but we’ve been using my health benefits (which hardly cover him) and (I know, bad) our mortgage has disability as well. And I’m really just not sure how to change this, and yet still have coverage.

  4. @Lisa:
    How much life insurance:
    What type of life insurance:

    Here’s the short answer. For ‘how much insurance’, look at replacing your income not your mortgage. Some multiple o f your income is the right number, not tied to your mortgage. For the type, the general answer is one of 10 year term, 20 year term or 30 year term. (I like 30 year term but it’s only well priced if you’re age 32 or younger).

    Disability insurance is also necessary to protect your income. I recommend you see what you can get at work first and if it’s not enough then step one is to see if your employer will increase the disability benefits through your work plan. Otherwise you’ll need a quote from an insurance broker – and I find most consumers get sticker shock on disability insurance premiums (which should speak to the amount of claims and thus the necessity).

    Just bear in mind that with disability insurance the benefits are normally ‘after tax’. So a benefit of 66% of your income is actually pretty good – it’s likely pretty close to your take home paycheque today.

  5. Love it! I hate paying fees for anything if I don’t have to! I research stuff all the time to see if I can get the same thing for a better price, or free. I remember when we first got a mortgage, and declined the insurance. The bank person (at the time a bank, now we deal with a mortgage broker), looked shocked. I guess most people just take it because they figure they have to. We have life insurance that would cover the mortgage should something happen. But most people just don’t know any better. Thanks Gail, for getting the word out there! 🙂

  6. I find the idea of bank fees so strange. I’ve never paid a bank fee for my account by getting multi-product rebates, which really isn’t that hard to do with my bank.

  7. I agree completely. I do not pay bank fees or any other kind of fee. If I need cash I go to an ATM at a branch of my bank ahead of time.
    I was offered a higher level, prettier Amex card for a fee. Ridiculous! My basic card works just fine and only gets used a few times a year anyway.

  8. The two bank-related fees I do pay are (1) Safety deposit box; and (2) premium gold card.

    For the safety deposit box, I have not been able to come up with an alternative to meet those needs (ie. having a central, offsite and secure place to keep tangible assets and important documentation), anyone who has suggestions would be appreciated.

    For the premium gold card, I do receive extra airmiles (ie. 1 pt per $15 vs $20) and when I redeem them, the amount of points required is less (ie. regular airmiles card = 1000 pts vs gold airmiles card = 850 pts). As well, there is car insurance provided as I do not have my own individual car insurance (as I don’t have my own vehicle). I have done the math and do save money on this card when taking all the extras into account with the extra fee I pay for this.

  9. I will say that in the event I can not find a my bank’s bank machine…then I make the point to at least withdraw more than what I need at the time so that I do not need to go to an ATM again for a while. I agree that paying $4.00 just to take out $20 seems silly…however if you take out 100, it still costs you $ but then you won’t be running to another ATM once the first 20 runs out.

  10. tasii, ask at the bank you have the safety deposit box and the credit card at (I assume they’re the same bank). We have those at TDCanadatrust (a travel Visa card, not an airmiles one) and with a minimum balance, those fees are waved. Yes, the minimum is high, but I like to have that minimum there anyway and I get a good “return” on it by having my credit card fees (and many other fees) waived as well as getting a free safety deposit box (which I need, too).

  11. I used to pay interest fees on our home and car insurance in order to pay monthly installments. Now I put the money away in ING each month and pay in one installment. I end up making money in interest instead of spending it.

  12. Thanks Gail for bolding the part about mortgage life insurance. As an insurance advisor I can’t stress the importance of ditching the mortgage insurance in favour of term life insurance enough. Not only is it (for the most part) more affordable, it covers your loved ones, not your bank! Thanks for the article.

  13. Thanks Tracey – I will ask, never hurts. 🙂

    I already get my monthly bank fee waived by keeping a min balance, so will see if they will through in the others!

  14. Hi Gaill,

    Great advice, our bank was also shocked when we declined mortgage insurance, we told them we have it covered in our life insurance. The guy didn’t seem happy that he couldn’t get the extra money out of us but oh well.

  15. Thanks for hitting me over the head about mortgage life insurance Gail.

    I have had a life-insurance policy on my LOC for the past five years and finally made the appointment to cancel it this past weekend. The advisor was incredulous that I was doing it, but it’s finally gone. That’s $120 that will go to the remaining principal each year so that I can hit DFF sooner!

  16. Here’s another tip for you: Anytime you get into a phone/cable/whatever contract, keep (ask for it, if you need to, and you very probably will need to these days) your very first bill ON PAPER filed in a safe place. One service provider (or rather the person in their employ) actually tried to SCAM us into automatically renewing our contract, which would have forced us to pay cancellation fees to get out of the contract. It’s a good thing my husband is an excellent record-keeper and had the original bill on file, because he had to fax it to them in order to prove that our contract was up in February, not April, as the guy on the phone insisted. Saved us a load of fees just keeping track!

  17. @ Lisa – if you can find a good financial advisor, they can also help with this. I started off paying Mortgage Insurance until I found out what a big scam it was. Our advisor calculated for both my spouse and I how much we would need for life insurance policies to keep the same income we have currently if something happened to one of us. She calculated the policy out for 20 yrs – our kids wouldn’t be dependents anymore.
    I cancelled the Mortgage Insurance since this amount would include mortgage payments. Gives us peace of mind! We had a nurse come to our house to do all the medical assessments and our policies are underwritten.

    I know they can look into disability policies too.

  18. @tasi & tracey – just an FYI in case you are not already aware. You can claim your safety deposit rental fee on your income tax. I believe it is half, so at least you can get some of it back.

  19. Gail, I wouldn’t dare think of it as a tax. Cancellation fees are profit!!! TAXES — pave the roads, clear the roads, provide police, teachers, doctors, desks, chaulk, x-rays, ect… I don’t mind paying taxes. My fair share for having a great Canadian life!! I don’t like seeing my taxes wasted. I don’t even mind paying for good services but GREED- cancel that!!!

  20. I will agree that paying to use a credit card is ridiculous, but sometimes certain people have no choice. Those who are trying to rebuild their credit after, say, bankruptcy are, more often than not, unable to get a free credit card and have to make do with those with an annual or monthly fee in order to have something to rebuild with at all.

    They should, however, still get rid of it as soon as they are able to get a free card. Continuing to pay is nuts

  21. Gail, Thanks for getting the message out about mortgage life insurance with the bank. As its not underwritten at application, it’s not guaranteed and you’re paying the same premium on a declining balance. Getting life insurance through a life insurance company is quick and easy and provides true peace of mind. Anyone buying term insurance should also make sure they purchase a policy that is covertile to a permanent policy at a later date with no medicals. As well the younger you are the less expensive it is. @ Lisa…..a quick google for Term Life insurance will give you a number of life insurance companies where you can get a quote on line and shop before meeting with an advisor. As an advisor it’s good to see that people are starting to become aware of the difference between life insurance with the banks and with life insurance companies.

  22. I personally think that the best deal right now in cellphones are the contract-less ones where you pay your monthly fee for use of the phone and 10% of that goes towards your tab… which was originally a discount on the cost of the phone.

    The reason I like this is because there’s none of this 20$ a month up to 400$ crap. I paid 150$ less than I should have for the phone I bought, and am paying it back slowly as part of the usage fee. If I want to jump ship? I square up. And notice how I never have to pay 400$!

    That said I think the monthly payments for usage are kind of out of whack.

  23. Instead of using a different bank for cash, especially when we are traveling, we use the cash back feature at stores we would normally shop at like Wallmart or Costco. If we are in the US it us chKeaper for us to drop into a Wallmart and pickup a couple if small items like gum or snacks and just get an extra $60. You can even do this at most Home depots and Lowes stores.
    No extra ATM fees and we always buy things we were going to get anyway. If we have to get cash quick we use a bank rather than a private ATM as our debit card plan allows us 4 other uses a month.

  24. My hubby always gets mad at me when I make him drive a couple of extra minutes to find my Bank’s ATM Machine. I refuse to pay fees to take my money out. I review my statements every month. I show him how much the bank is taking in extra fees every time we get hit with one. I think he’s finally getting it. Thank for reminding us about the little things that can add up if you don’t pay attention.

  25. @ Shawnee and Gail – some pay for use credit cards make good sense. I have the Capital One Aspire card, which has an annual fee of $120 (no fee for supplemental spouse card). BUT every year I get 10,000 miles which = $75 cash credit, so the actual cost is $50, and the rewards this card generates are amazing! One definitely has to make sure they’re running enough through their card to make it worthwhile – and pay it off every month. My wife and I charge $4000 a month, and it seems every other month I’m getting some cold hard cash put against it. The key part of it being (a) transactions have to be significant and (b) has to be paid off each month.

  26. I agree with Shala, I very rarely get my cash from my own bank’s ATM, I always get cash back from a supermarket or Home Depot or Walmart and it costs nothing! I never read about this option and I can’t understand why anyone would pay money to get cash!

  27. Gail, you made some damn good points. And I completely agree that paying to cancel your cell phone is bad planning. But seriously, how can cell phone companies get away with all these fees? Even BANKS! It is crazy to think that in 2013, companies can still do whatever they want and charge as many fees as they want without any consequences. We are all victims!

  28. avatar Jeff Scott Says:
    February 23, 2013 at 2:35 am

    The credit bureau is nothing but an information farm. The score you get is not the score the bank receives.

    The credit score is generated with thousands of pieces information about you that you provided (unknowingly) yourself, as well as thousands of other factors that you have absolutely no control over.

    The bureau is out to profit on information whether you, or a lender pays for it.

    A credit bureau is not a government information bank to protect the consumer, it does not want to even deal with the consumer.

    A credit bureau however is mandated to provide a free copy once a year so the consumer can check their own information to ensure its correct (and if it isn’t – good luck!)

    The score YOU get is generated based on your debt and payment history, it does not even come close to the information that the bank receives.

    The credit bureau is an information warehouse. Information is bought, sold, and traded, with other lenders, credit card companies, banks, rewards programs, magazine subscriptions, information from Statistics Canada, MPAC, and the list goes on.

    Everything you do is tracked, and I mean everything. The information on your credit card and debit card purchases are tracked, the information collected about a transaction includes your transaction, and information about the business, the businesses SIC codes (The North American Standard Industrial Classification Code) what the business does, and in some cases what you purchased can be shared with the banks and bureaus.

    The information is so detailed that Canadian Tire noticed a pattern on accounts that were written off, that included an increase in the use of their cards at establishments that sell alcohol. The information patterns were so detailed that their computers actually look for simular patterns and immediately reduce credit limits on open accounts with the same pattern, that my friends is how much, and how detailed the information is that is collected about you.

    The credit bureau score is so entrenched in information that there is literally nothing you can do to change the score other than paying your bills on time and maintaining a healthy financial standing, The remainder of the score is completely out of your control.

    The credit bureau score also includes a bankruptcy indicator score. This score includes your personal financial information and standing. This score also includes indicators of where you live, what is happening in your community, right down to your individual postal code. Your score also reflects what you do for a living, where you work, and how long you’ve been there. Your score also includes information you cannot control. The score uses algorithms to determine what type of job your in, and information on how long the average person works in this field. The score indicates the financial health of where you work, based on local economic conditions. Your predictability score even determines how others are doing with credit profiles like yours, doing the same job in the same community. The local economic vulnerability of your community also goes into your predictability score. Where you live can effect your score. Even how your neighbors handle their own accounts can affect the bankruptcy probability score for you, and your other neighbours. The value of your home, and the homes in your community can also affect the predictability score and your ability to pay. The factors of your personal score are limitless, and impossible to calculate.

    If you pay your bills on time, live within your means, and are not underwater – and not robbing Peter to pay Paul, you have no need to see your score – and quite frankly, its a useless waste of money. There is nothing you can do to change it. Nothing!

    As for cards that pay rewards. If you paying a fee, you’re getting nothing for free. Banks do not operate a product at a loss. There is no doubt that once you’ve accumulated the required points you need for a free trip – the ceiling will no doubt be raised, and you’ll have to spend more to save more. Take the fees you pay for credit products and place them in a savings account, and only use your card for your needs – and not your wants – you’ll have enough money aside for a trip long before you’ll be able to collect the points with unnecessary spending.

    Reward cards are designed to make you SPEND more – because you’re that much closer to getting something for free. If you see it this way. You’re a fool.

    Nothing makes me laugh harder than to see someone who spends thousand of dollars on unnecessary items, so they reach the 30,000 point level to receive a free Tassimo machine. Not realizing that if they really wanted the machine, they could have bought one at Walmart for $99.00 instead of spending $30,000 on their card to earn 30,000 points to get their ‘free’ Tassimo.

    You know there is a reason why credit card companies use points, and not tell you how much money you have to actually spend to get the reward, don’t you?

    Using your card as a convenience and paying the bill off in full, without worrying about the ‘rewards’ will reward you years sooner and faster than any reward card ever could.

    Credit Bureau Scores and Premium Fee Cards are just shiny bait for sucker fish! World Elite & Infinite are cards sold on emotions, claiming that you’ve arrived. These cards do have a benefit for those who travel OFTEN and require insurance for traveling. The fee will offset the cost of the insurance, however if you’re getting the card because your neighbor the “Joneses” have the shiny ‘metal of the month’ card, and you need it to prove to the world that you’ve arrived too….congratulations you’ve arrived at “Fools Paradise” – enjoy your ‘free’ vacation – and when you get home – you can have the biggest garage sale on the block to sell off all the crap you didn’t need to get the points for your ‘free vacation’.

  29. avatar Elizabeth A Says:
    February 23, 2013 at 3:33 pm

    Jeff Scott here in the US we have three credit bureau reporting companies, and it is advisable to check your report once a year. Your can check the report, not the score, for free that often. Because there are often errors in the information, some of them can really affect your score, and also it’s important to make sure your identity isn’t being hi-jacked. All that info about what credit cards you have, etc, shows that very well.

  30. tasii, I too have a premium gold card which I pay for. In return I get 50,000 points which allow me to take 3 short term flights which would cost me at least $1,500.

  31. sorry, I should say short haul flight, not short term

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