Today I throw myself at the mercy of TF’s readership (I was heartened by yesterday’s constructive responses to Adina’s questions) and ask for your wisdom about my Teachers Credit Union chequing account dilemma.
I eschew fees and unnecessary expenses — particularly the monthly variety. My primary chequing account is with the Teachers Credit Union (the missing possessive apostrophe is their error, not mine). I haven’t had to pay any fees since I left school (I closed my TD student chequing account before it converted to one of its fee-heavy variants).
The Teachers Credit Union hasn’t been perfect to me, but the pros outweighed the cons. It was nice to know my bankers directly. In fact, I even worked there at one time. Being a member (a.k.a. part-owner) of a credit union is better than being a customer (a.k.a. mark) of a bank. My credit union has even rewarded its members by issuing high-yield investment shares. But — let’s be very clear — the biggest benefit was always my “no-fee” chequing account.
Sadly, my beloved Teachers Credit Union called me up and told me that my ‘deal’ (a.k.a. my chequing account) is coming to an end in December, when I’ll start paying a fee. Little did they know that I’m not the kind of chump that pays fees. Worst of all, they tried to use the call as an opportunity to “up-sell” me on other products, which was a bit offensive. I’d expect such brazen idiocy from TD or BMO, not the management of the Teachers Credit Union.
I wouldn’t be frugal if my MO was to inactively abide by expensive fees. I think I’ve got three options. If I have more, do tell.
Chequing Account Option #1 – Stick with the Teachers Credit Union
- Accounting Cost: $5.95 a month ($71.40 a year); or
- Opportunity Cost: $40 per year (2% on a $2,000 minimum account balance)
Obviously, if I continued to bank at the Teachers Credit Union, I’d keep the $2,000 minimum balance to avoid their fees. Interest rates would need to almost double before the opportunity cost would exceed the accounting cost (and that’s not even counting the taxes I’d pay on earned interest).
Chequing Account Option #2 – Move to a Big, Evil Bank
- Accounting Cost: $3.95 a month ($47.40 a year); or
- Opportunity Cost: $30 per year (2% on a $1,500 minimum account balance)
I currently have a TD chequing account that I started in May. I only did this to receive a $250 bonus. I’m going to receive the bonus tomorrow, after which I had planned to close the account. Right now I have a chequing account that costs $30 a month — a fee that is waived with a $5000 minimum balance. Obviously I’d ‘downgrade’ to another account if I were going to stay with TD, which is reflected in the costs above.
The key benefit of TD, compared to the Teachers Credit Union (and compared to option #3 below), is that there are TD locations everywhere in Canada. The Teachers Credit Union doesn’t have a branch north of Burlington.
The key drawback is that, if I keep $1500 in my TD account, I’d only get a measly 10 free transactions. If I kept $2000 in my Teachers Credit Union account, I’d get unlimited transactions. (Side note: isn’t it interesting how TD has carefully balanced the accounting cost and opportunity cost of their account?)
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Chequing Account Option #3 – Give Up on Bricks and Mortar
- Accounting Cost: $0 (50 free cheques will cover four full years of my average consumption)
- Opportunity Cost: $0
I previously opened an ING THRiVE account for a $100 bonus. I could switch everything to this ING account and flip the bird to all the Old Economy financial institutions — regardless of whether they’re owned by the Bourgeoisie or fellow Proles.
Initially, I thought I couldn’t bank with just ING. I was concerned about my inability to go to a physical location to transact more complicated business on demand (e.g. to get a cheque certified, to get coin rolls, etc.). Then I realized that until May (when I opened my TD account for the bonus) I couldn’t bank “in branch” anyway. Again, the closest Teachers Credit Union branch is in Burlington. How did I survive until May? The Teachers Credit Union is on the Exchange Network. At any Exchange Network ATM (pretty much every credit union and National Bank ATM) I can make deposits and $0-fee withdrawals. ING also offers Exchange Network access for deposits and free withdrawals. Would it be less convenient to return to a branch-less banking life? Yes. Could I still ‘THRiVE’? Absolutely.
What do the Dear Readers of TimelessFinance think? Which option should I pick? Or do you have another idea? (I’m going to be honest: in writing this analysis I convinced myself that #3 is the best option, but I’m still interested in your thoughts.)
As far as I know, the ING chequing account is not really free. The first set of cheques is free, but subsequent sets must be paid for by the depositor.
Yes. 50 cheques are free. As I pointed out, this would be four full years of my average consumption. If, in four years, I had been banking with THRiVE and I called them up and said “Hey ING, I’ve been using a cheque a month. Can you spot me another 50 cheques for the next four years?” And they said “it’s $19.99″ then I would promptly switch to PC Financial. I suspect this fee is to protect against unreasonable levels of consumption, lost cheques, etc.
I have a TD chequing account – the $3.95 plan with 10 free transactions and a $1,500 minimum account balance to waive the fees. I also have an ING Thrive account where my payroll gets deposited. Since I use my credit card for everyday spending and bill payments, other than City of Lethbridge utilities and Enmax power (jerks), the 10 transactions aren’t really an issue for me. If I have to use debit, or an email transfer, I use the ING account for free. The two chequing accounts are linked, so I can easily transfer money between them within a day or two.
I like having the TD account because that’s where I keep my mortgage and investments, and it is convenient to have a relationship with someone at a brick-and-mortar bank.
I’m sure you could Thrive with an ING account and no brick-and-mortar alternative.
It’s also a huge pet peeve of mine that utilities won’t accept credit cards (or, at least here, they charge a ridiculous ‘convenience’ fee).
I actually based a lot of my analysis on your Moneyville article (http://www.moneyville.ca/blog/post/1260185–three-no-fee-bank-accounts-compared). It made me feel a bit more confident about taking the leap. I’m glad to know I could switch to PC and get unlimited free cheques if ING turned out to be sticklers.
Cool, I’m glad you found the article useful.
Option #4: Withdraw all your assets from all bank accounts and go on the zero-fee “Stuff it Under Your Mattress” plan. You pay no monthly fees AND you get more comfortable padding for your mattress so you can sleep easy on a comfortable mattress and with peace of mind!
lol I’m not sure about your mattress, but sadly mine isn’t a CDIC-insured institution. Still fighting for accreditation though.
Personally, I’d stick with the Credit Union. I’d do it based on principle, because I don’t think TD needs another customer, and because I like what those smaller Credit Unions and businesses stand for.
I know that the $2000 minimum may offend one’s sensibilities, especially when it represents a “cost up” that did not previously exist. That said, as a practical matter, I typically keep a fair bit more than that as a float in my chequing account anyway (as there are always lots of “bills” – mortgage, insurance, credit cards once/mth, etc., coming out, and only get paid twice per month). So practically, I really have to keep that amount there anyway – so the opportunity cost, I would argue, is really not actually a cost.
I personally bank with a Credit Union and I love them. I like what they do and stand for in principle, I know them, and the service has been outstanding over the years. I would personally be willing to tolerate a fair bit of “deterioration” from them and still be happy to go there, versus the other options.
TBH, this isn’t the first example of ‘deterioration’ I’ve experienced with my CU. It’s just the first that stands to cost me money.
I appreciate your principled stand. While I like to imagine I have principles, my CU doesn’t particularly represent anything I hold dear (its management is not pro-union for example, which is a movement I strongly support and that’s something that irked my late father considering they supposedly catered to teachers). I think “owning” part of your financial institution is more money-smart than not, but only if it’s profitable. I’d keep my $25 membership share and my TFSA investment, I just wouldn’t have a chequing account with them and pay the corresponding $70+ a year.
Personally, I would go with ING. My main annoyance with them in the States was no paper checks available AT ALL and their ATM network sucks. If your ATM network is the credit union one, that would be way better.
I love credit unions for that – it makes it so you can pick the one with the least in fees and then use the closest one’s ATM
Besides, if after 6 months, the ING account isn’t working for you, you can always go back to TD.
Ever since I graduated university, every location that I’ve lived or worked has had an “Exchange Network” ATM that was closer than ANY bank ATM. How crazy is that? The exception is now, when I’m living in the middle-of-nowhere. The only bank ATM in town is a TD ATM.
I think Jack is right BUT I would turn that ‘worthless’ fiat currency into REAL money in the form of Gold and Silver… snicker snicker… Remember your home address would be easy to find well plus we could just wait for the brinks truck to drop by when you pay bills…..
lol Fonestar emailed me to gloat when silver had its recent price spike. The best part is, he’s still DOWN from last year lol. And he’s not collecting an interest/dividend cheque while he waits for the market to give him what he stupidly paid for his overpriced metal.
There isn’t much that you can’t do with an ING chequing account if you want the minimum fees possible. It can be hard to avoid giving up a few dollars a month in fees / opportunity cost depending on what you need though. I would give it a try and only give in to fee accounts if there was something that costs more to do through ING.
I haven’t found much use in having a relationship with someone at a bank. It’s hard enough since the people change every 6 months, and I’ve been denied several slightly unusual (but quite reasonable) requests even after being a customer at a credit union for nearly a decade. As you found, it’s mostly used as a channel to up-sell you and convince you to take expensive options (like high mortgage rates and high investment fees) for the sake of the relationship. Once they feel bad about making so much profit from you, they might throw in a few small extras. Even credit unions don’t have much of an advantage outside of chequing accounts. Our investments are at TD and our credit card is from CIBC.
When I set up my business account with a new credit union I found that they did want to limit the line of credit a bit since I didn’t have a history there. That wasn’t an issue because I just have it as a precaution, but you’re planning to get a new loan every 6 months then it might help to have someone who knows that you’re good for it. Earlier this year they also made me a great offer to refinance the mortgage without having to negotiate, but I could have likely matched it somewhere else with a bit more work by asking around.
Does Ontario have any larger credit unions? I don’t really go to branches but one of the nice things about being in a province with one dominant CU is that they don’t lack much when compared to a large bank, including branches everywhere you go. If you want somewhere you can walk in that might be ideal. The downside (depending on how you look at it) is that they might soon become a federal CU and be subject to more regulation.
Ontario doesn’t have much in the way of large credit unions. In my current area, the Kawartha Credit Union has a ton of branches. But then when I move south again in the near future, I wouldn’t have any of their branches nearby. The “big guys” like Meridian really start to resemble banks to a point that I agree there’s really no point (and they don’t have enough branches outside the GTA).
And that’s exactly my thoughts about financial services in general. They make these promises of ethereal “excellent service” in exchange for ridiculous fees. Then when you’re paying them for years, there’s no actual value (other than, perhaps, a warm-and-fuzzy feeling). Do they do my taxes? Do they even REALLY plan my investments in a tax-efficient way? I’ve worked for two financial institutions, and if I put the Dan Bortolotti article that Leigh cited in front of the average employee, their eyes would glaze over. They’d have no clue. “Oh you need a BMO mutual fund!” is what they’d say at BMO. Or “OH you need a ‘high interest’ deposit product!” is what they’d say at the credit union. No real insight. People are stupid and that’s part of the reason I find the banks’ “you need our advice” commercials so damned patronizing.
It’s not all bad. Without the big banks, how would you know that “You Can Spend More Than You Think(TM)”?
You used eschew, just as I did in my comments yesterday! Hurrah, we’re beginning to write alike!
I’d use Thrive myself, except my parents in the USA have a strange habit of borrow tens of thousands of dollars from me for short periods of time for their business, requiring me to be able to wire transfer funds (which ING cannot do).
Don’t forget to subtract tax from the opportunity cost on the interest you would have earned on the minimum balance, probably 30% or so should suffice?
Your first comment meant I obviously needed to google whether I’ve used the word “eschew” before on TF lmao.
March 15th http://www.timelessfinance.com/2012/03/15/credit-card-arbitrage/
May 23rd http://www.timelessfinance.com/2012/05/23/td-bonus-plan/
And yes, you’re right, my opportunity calculation was off. In any case, paying fees sucks and so does keeping a minimum balance lol.
Glad you brought this up. Pretty soon (in a year or so) I’m going to loose my fee free account