NICKEL AND DIMING YOURSELF

The Budget Doctor’s Advice on Cash Withdrawals

Some major banks recently announced that they would be providing ATMs that permit a customer to withdraw $5 or less. They may even offer change so it would be possible to get bus fare. This may well be convenient for folks who don’t like to carry cash and just want to get the bare minimum. It may be helpful for the customer who has a $19 balance and needs just a few dollars. It will certainly provide banks with a new opportunity to collect fees. Right now the typical ATM fee is around $2. If a consumer withdraws $20, that represents a 10% fee. But if a consumer withdraws $5, that $2 fee represents 40% of the transaction! That is a big fee.

More consumers are using prepaid debit cards to manage their cash. Some of these cards charge $3.50 every time the card is put into an ATM even if it is for a balance check! Withdrawing $10 cash from one of these cards could easily cost $5 or more depending on the ATM fee.

More and more people seem to avoid cash in favor of electronic money. That certainly offers some advantages in terms of safety and ability to track spending, but it can lead to wasting money. The rules will change frequently, but the Budget Doctor has a prescription:

1. Never spend money to check a balance.
   It takes discipline to write down every deposit, every withdrawal and every fee charge, but unless you can keep an extra $50 in the account that you will never spend, it is necessary. They have little booklets for this called “check registers” but there are certainly apps for your phone too.
2. Keep your spendable money in one place.
   Don’t try to keep a balance on a debit account, a prepaid card and your phone. Save on fees and confusion by using one location.
3. Consider carrying cash.
   If you know you buy a soda or a coffee every day, put $10 in your wallet on Sunday night and pay cash. Also, if it doesn’t last until Friday you’ll know that you need to track your spending. Even if you don’t usually spend cash, having a $5 bill tucked away could save $3.50 in fees if you need it.
4. Consider getting cash when there is no charge.
   Many grocery and discount stores will let you get cash back when using a debit or prepaid card. That eliminates one transaction and the fees that go with it.
5. If you incur fees; figure out how to control them.
   If you have a prepaid card with a $3.50 fee for loading, think about combining deposits to save money. If you use a card frequently and have fees, look for a different account that charges less per transaction, even though it may have a higher monthly fee. If you don’t use a card frequently, look for an account that has a lower monthly fee even if the transaction fees are higher.

There are so many options for accounts and services that many consumers end up spending more than they should. And sometimes new services, like $5 withdrawals sound attractive so consumers sign up for them without thinking about the consequences.

The fact is, consumers pay for everything. If you want your favorite singer’s picture on your card, expect to pay for it. If you want to pay your bills from your phone, expect to pay for it. These fees may seem small, but fees are like calories; just a few extra will eventually weigh you down.