Do You Pay for Financial Services?

Do you pay other people or companies for the privilege of dealing with even the simplest areas of your finances? If so, it may be time to re-evaluate whether you’re getting your money’s worth with these expenses.

Let’s look at three of the most common financial management areas where people often spend money for things where free alternatives exist:

Free Checking

About 5 years ago, right around the time that online banks were just coming into the mainstream, it seemed that you could get a free checking account anywhere you looked.

To some extent, that’s till the case today, but banks are increasingly turning to paid accounts that require specific minimums to avoid the “maintenance fees.” Some examples include:

• An average minimum balance over 30 days.
• An absolute minimum balance any anytime in the last 30 days.
• A certain number of transactions each month.
• Direct deposit of your paycheck.
• A mortgage, credit line, or credit card, sometimes with a specific minimum limit.
• A linked account of some other type.

Usually, any one of these is sufficient to avoid paying the fee, which on some “premium”-level accounts can be as high as $20-$40 per month. These accounts target high-income earners, since even the basic accounts offer standard features like FDIC insurance. This group shouldn’t have a problem keeping high checking balances, and in return get perks like:

• Free linked savings accounts with no fees.
• No-fee banking services.
• Interest rates on checking balances.
• ATM fee waivers.

I was even lucky enough to score a free business checking account with Wachovia before they converted to Wells Fargo in my state, and Wells has grandfathered in my account on the free level. For any of you who own a business, you know that finding a free business account is even harder than a personal account.

Because of the nature of my online work, I knew that my balances and transaction counts would be low, and that my needs would be simple, so the services offered by the free account were more than enough.

Credit Cards

If you’re a balance-carrying cardholder, you are already painfully aware of the cost of having a credit card each and every month. Beyond that, however, many cards also charge a membership fee, which is typically added to your bill every year.

Base-level cards rarely charge a fee, so there is an expectation that you are getting some extra benefits if you’re in the group that pays to have a card. The important question is whether those benefits are useful to you and worth at least what you’re paying to get them.

One example is my American Express Blue Cash card that I currently have, which is free. In recent months, I received a number of offers to upgrade this card to a “Preferred” card, which carries a fee of $75 per year. In return for this fee, I can expect to get:

• 6% cash back at supermarkets; with 3% and 1% tiers for other spending
• Premium benefits, like a travel hotline and accident insurance

For people who use their cards almost exclusively or travel a lot, this might be a fantastic deal. I declined the offer, but there are certain instances where I would consider a paid card. Many cards also offer a one-year fee-free period, which coincides with the time many of the bonus points kick in for new members. A lot of people take advantage of this period to get mileage bonuses and later cancel the card before the annual fees can kick in.

Beyond evaluating your own credit cards for fees and determining whether they are worth it, ensure that you’re also checking your card’s rates in case that you ever need to carry a balance on the card.

Personal Finance Software

Another area where a lot of people spend money is tracking software for our money.

When Quicken was the only thing around, you may have been on the hook for $50 every year if you were an early adopter, and even less if you only upgraded every 2-3 years like me.

The advent of Web 2.0 has brought two new extremes to this genre. There are now free alternatives to Quicken like Mint.com (run by the same company), or Money Strands to name a few examples.

On the other hand, there are also companies charging monthly fees for cloud-based money software. While for many people, the cost may be justifiable, it usually far exceeds what we used to pay to analyze and track our money.

Look for Value

Just because things cost money doesn’t mean they’re inherently bad–that’s not the point at all. The idea is to be alert and aware of how you’re spending your hard-earned dollars and to make sure that the value and services you get back are worth every penny, and more.

I encourage you to take a good look today and make your own conclusions.

(Photo credit)