If you still use a brick and mortar bank (as I still to), then you face the annoyance of the ridiculous ‘monthly fee’ for your chequing account. You can often waive your bank fees if you keep a minimum balance in your account, and you shouldn’t discount the return of this investment.
My setup
I currently do my banking through TD Bank. While I see the value of moving to a purely online bank such as Tangerine, I’ve got too many automatic payments (bills, pay cheque direct deposits, investments) to have made the move yet. In the meantime, I’ve been grandfathered into a Basic value chequing account that costs $3.95 per month, which is waived if I keep a minimum balance of $2000 at all times. This account offers no perks and hardly any transactions, but since I buy everything on my credit card and pay it off monthly, this doesn’t really matter. I ALWAYS keep $2,000 in this account.
Couldn’t this money be better invested?
$2,000 (or whatever the account minimum is) seems like a lot of money to waive a $3,95 fee, couldn’t this money be better invested instead of sitting in a chequing account making 0 interest? As a long-term investment – probably, but as a short-term investment, no! Here are a few return on investments for a sampling of fees from the major banks:
| Bank | Account | Cost | Minimum | Total saved per yer | 1-year annualized return |
|---|---|---|---|---|---|
| TD | All-inclusive | $29.95 | $5,000 | $359.40 | 7.199% |
| Scotia | Basic Banking | $9.95 | $2,500 | $119.40 | 4.78% |
| TD | Unlimited | $14.95 | $4,000 | $179.40 | 4.49% |
| Scotia | Scotia One Chequing | $12.95 | $3,500 | $155.40 | 4.44% |
| TD | Everyday | $10.95 | $3,000 | $131.40 | 4.38% |
| TD | Value | $3.95 | $2,000 | $47.40 | 2.37% |
| CIBC | Everyday Chequing | $3.90 | $2,000 | $46.80 | 2.34% |
The return on investment varies quite a bit depending on what your fee’s are. As for a guaranteed return on a short-term, completely risk-free investment, 2.34% – 7.19%(!), I don’t think anyone would advise you against that. If you are tied to an expensive chequing account and can’t give it up for something a little more simple, the 7.19% return on the $5,000 investment is an amazing guaranteed return.
So what does this mean?
Almost every smart financial adviser will tell you that you should be keeping a rainy day fund in a safe, non-volatile, and easily accessible spot. The problem with safe, non-volatile, and accessible is they often provide very little return. That’s what makes investing a chunk of your money in a chequing account to waive your monthly fee a smart move. Everyone’s banking needs differ, but if your bank offers to waive your monthly fee by keeping a minimum balance, it is definitely something you should take into consideration as an investment.