Home Budgeting

Banking Transaction Accounts

It seems absurd that banks want to charge us a fee for storing OUR money with them. Most everyday transaction accounts are around the $5 per month mark. It doesn't seem like much but look at it this way. If someone came up to you in the street about once every 12 months or so and said "Here you go, I want you to have $60." I'm sure everyone reading this will say "No worries, thanks" and pocket the cash.

Unfortunately we won't always be able to get around paying a monthly fee, but isn't it worth a shot? So let's try...

Firstly, how many transaction accounts do you have? In the majority of case we only really need one transaction account for our salary to go into and to access cash at an ATM. If you have more than one transaction account consider closing all but one. Consolidate your accounts into ONE transaction account. This will surely save you money on unneccesary fees. Remember let's not think of this as a "savings" account because you'll be earning next to no interest on it. It's purely for transactions. We'll get to SAVINGS accounts later.

Next you need to find the cheapest account you can, or even pay nothing for it if possible. If you have a home loan some lenders will provide you with a free transaction account. If you already have a free transaction account, well done, you can skip to "BILL MONEY".

Most banks charge us a fee for the privilege of having a bank account. But it doesn't have to be this way, particularly if you have a home loan. Some lenders will provide you with a free transaction account if you have your mortgage with them.

So, close any unnecessary accounts. You should surely only need ONE TRANSACTION account. My poor Mum years ago opened up a new bank account for every direct debit that she had coming out of her accounts. I couldn't believe it! I got all of the statements out and her fees for the 7 months that she had this arrangement going were around $180...JUST FOR HAVING AN ACCOUNT!!! I found one account for her that charged NO MONTHLY account keeping fee. The only restriction was that she had 15 electronic withdraws per month, with unlimited internet transactions. This saved her nearly $250 per year.

It's time to try and consolidate your banking. If you have more than one everyday transaction account, chances are you're paying too much in fees. I cannot think of a real reason why anyone would need more than one transaction account. The trick is to find one that will cost as little as possible, preferably nothing. Some lenders even have an offset account / transaction account rolled into one that give you a set number of transactions per month which should be more than enough.

Some accounts with cheque books attached can quickly rack up fees. You need to ask your bank / credit union if EVERY transaction on your cheque account attracts fees or whether it's simply just the cheque that you write that gets charged. If your cheque account has no monthly fee but has a fee per cheque written then maybe you could get away with it if you really need to. But an account such as this will still probably have other restrictions such as transaction limits, and foreign ATM fees (where you a charged a fee by using another bank's ATM).

It's time to shop around for a bank account with the lowest possible fee. If you have a home loan with a bank or credit union, do they give you a free transaction account? Ask them and if they don't suggest that you're shopping around to find a better deal. You never know what they might come up with for you. The next thing is to stop using other banks ATM's. It's costing you a fortune and going straight into the shareholders' pockets! Let's put some money back in your pocket. Go and get all of your bank statements from last year and add up all of your fees for "Excess withdrawals", "foreign ATM fees", "monthly account fee". Go on, I dare you!!

OK, now you've done that, let's work it out. What did you pay for the priviledge of using another bank's ATM? What about excess withdrawals? And this is my favourite, what did you pay for the 12 months, just for having a bank account, that is, the monthly account keeping or service fee? It's a joke isn't it? Let's put that money back in your pocket.

If your lender can't give you a free transaction account, either find someone who can, or go for the cheapest transaction account. A quick web search will reveal who has the cheapest accounts. Most have them for $2 - $5 per month. Bank of Queensland even has one that is free and that pays you $2 per month, but you have to maintain a $2 000 balance. This is great if you can do your banking at a Bank of Queensland ATM, otherwise you'll get charged $2 just to put your card in someone else's slot!. So do some research, and find the cheapest or free transaction account. Then I'd suggest closing any accounts that you don't need and sticking to the one transaction account. A hint here is that if you're going to open a new account, do that 1st and make sure it's functional before you go and close the other account/s that you perhaps had your pay going into!

So what are you going to to with your "Bill Money". You could put it in a tin the kitchen, but the likelihood is that one night when you're feeling a bit down in the dumps, it'll pay for pizza. For this system to work, you need a little discipline, remember! This is where the money management software such as MS Money comes in. Alternatively, write it down in a book but somehow it has to be "separated" from your transaction account cash. We have a mortgage offset account so it simply remains in there, saving interest on our home loan, but our money management software shows it as separate from our leftover cash. If you don't have a mortgage offset account, why not put the money somewhere where it can work for you. Preferably you want it in an account with NO ATM access. This reduces temptation. The better the interest rate here the better. Also try not to pay any fees. ING has a free savings account paying about 6% as does Commonwealth Bank. It's called a NetBank Saver. When you pay your bills on the credit card, then simply transfer the amount onto the credit card when it's due. This was, your credit card company is effectively making you money!!! It works like this.

You're borrowing money from your credit card company to pay your bills. So long as you pay your card off in full every month you pay NO interest. Meanwhile, the money for your bills, which you had all along is sitting happily earning about 6%. How good is this! Plus, when you pay your bills by credit card you then have up to about 6 weeks to actually pay the cash out to the credit card. So think of how good this will be when your bill money starts to add up, and it will, you could be earning a pretty good interest rate on a fair old amount of cash sitting in your "Bill Money" account. Importantly here, consider opening the account in the name of the person who earns the least amount of money in your household. If you're a single income family with one parent working and the other at home, open the account in the name of the stay at home parent. This way when you earn interest in this account you'll pay far less tax, if any.