Since graduation, for almost two and half years, I have been making the biggest financial mistake of my life. I would always leave my chequing account at TD Canada Trust at either a zero balance or a negative balance (overdraft protection). I felt that each and every dollar left over from my pay cheque should go to pay my credit card balances and other debt that I had. The car loan, the student loan, the student line of credit, anything and everything I consider debt.

The Devil is in the Numbers

I hold TD Canada Trust’s Value account which includes only ten (10) free transactions per month and a $3.95 monthly account fee.

• Monthly fee: $3.95
• Overdraft Protection fee: $3.00
• Average monthly interest: $1.00-$2.00
• Other bank fees: $3.00

However, I also paid a $3.00 ODP (overdraft protection) fee to allow my chequing account to go negative and owe the bank like a revolving credit card. This fee was to protect myself from insufficient fund fees of $35 whenever my account didn’t have enough funds to cover recurring bills and miscellaneous withdrawals.

There’s another issue. I would normally keep a negative balance until the next paycheque came in which meant I was being charged interest everyday on the amount that I owe them. I averaged around $1.00 atleast for these interest payments and the last time I checked, the interest rates on overdraft balances run around the same rate as credit card interest rates which should be in the neighbourhood of about 20%. Add to that going over the maximum allowed of ten transactions per month and that’s another $2.00-3.00 of ‘other’ bank fees.

The total I would usually pay on my chequing account was $(3.95+3.00+1.00+3.00) = $10.95 per month!

That’s outrageous! That’s a cost of more than $120 per year! So how can we get rid of this totally unnecessary expense and pocket that sum instead? Keep the minimum balance required by your bank to waive the monthly fee! The minimum balance for my account to waive the fee is $1,000. However, since I do plan to keep a balance, I no longer have a need for overdraft protection so long as I keep a healthy buffer from the minimum.

Doing a quick calculation, that’s atleast $10/$1000 = 1% return per month on your $1,000 guaranteed. That’s almost like a 12% gain per year on a $1,000 investment. Compare this with the amount of return you’re getting putting the same amount in another investment vehicle such as a savings account or a GIC. You will not get a 12% return guaranteed anywhere else.

Stop paying those pesky account fees and if you have an ODP fee like I did, get rid of it. You’ll be saving more money starting today. It just makes sense!

TD Canada Trust Value Plus/Value Account

Early 2008, I graduated from school and TD started to charge me $8.95 per month to maintain the Value Plus Account. If you keep $2,000 in the account, the fee is waived but I’m currently in debt repayment mode so I’m not in the position to leave that much just sitting idle in the account.

A better setup I thought, was to keep the TD Chequing account and downgrade to the Value account, which only charges a monthly fee of $3.95. The Value account is cheaper because it is much more limited with only 10 transactions allowed per month versus the 25 for a Value Plus account. Other differences are outlined in the table below. Now if you don’t have much chequing activity, you can just leave your account as is. For myself however, I perform a lot of cash withdrawals, online payments, and transfers with my chequing account so I had to find a cheaper equivalent of an Infinity account.

TD Canada Trust Chequing Account Pros

• More TD Green Machines
• In-branch teller service for deposits, money orders, etc.
• Good web user interface for online banking
• Maintain banking relationships with local branch

TD Canada Trust Chequing Account Cons

• Limited chequing activity or transactions allowed
• High fees for going over the transaction limit
• Expensive cheques

President’s Choice No Fee Bank Account

In comes the No Fee Bank Account from President’s Choice Financial (PCF). This account is free from monthly fees and provides unlimited chequing activity for withdrawals, online payments, transfers, and even free cheques!

At first glance, it seems like this is all the chequing account you’ll need for everyday banking so why do I keep my TD Canada Trust account you ask? Simple. I keep it to maintain a close relationship with my bank, and for the people service they provide with their in-branch tellers. Plus, there are more Green Machine ABMs out there than CIBC or Amicus machines.

Here’s a quick pros and cons list for holding the PC No Fee Account.

President’s Choice Financial Chequing Account Pros

• Unlimited free cheques (TD Canada Trust charges $25 per book)
• Unlimited chequing activity such as withdrawals, payments, and transfers
• No fee ABMs if you use an Amicus or CIBC bank machine

President’s Choice Financial Chequing Account Cons

• Amicus or CIBC bank machines are not as common as TD Green Machines
• No branches
• No teller service
• Strictly phone or web-based banking services
• No real bank relationship