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:
- 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.
- 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.
- 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.
- 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.
- 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.