The $1,500 Frisbee
Over the years, small fees add up.
This post comes from J.D. Roth at partner blog Get Rich Slowly.
On the first day of college, I opened my first bank account.
The gym was filled with registration tables, not just for classes and clubs, but also for local businesses wanting to sell themselves to the students. There were even a couple of banks. Because I was getting a small payment from the school to cover living expenses, I needed to open a checking account.
The two banks had very different methods of attracting students. One displayed a sign that said "free checking." The other was handing out Frisbees. My choice was easy. I wanted the Frisbee. (Free checking? How boring.)
I signed up for my checking account, got my free Frisbee, and spent
the afternoon on the quad, tossing the disc back and forth with my
roommates. When it was time for dinner, I took the Frisbee up to my
room, put it in the closet, and never used it again. But I had that
checking account for nearly 17 years.
Classes started. I forgot about the Frisbee, and I forgot about the checking account. The next month, I received my first bank statement. There was a $5 service charge, but I didn't care. It was just $5, right? I accepted the fee as part of the package, and as part of being an adult. My parents had always paid service charges on their bank accounts, and I expected I always would, too.
I paid $5 a month to maintain my checking account throughout
college. When I graduated, I continued to pay $5 a month. In the early
1990s, the fee increased to $8 a month. This bugged my wife
(who had the same account), so she went into the bank and had them
switch her to free checking. I didn't do anything.
In 1998, I cut up my credit cards and transferred the debt to a home-equity loan held at the same bank as my checking account. It occurred to me that maybe I could get the same free account that Kris had moved to a few years earlier. I asked. They said no, the only account available for me was the one I had. I accepted that answer and kept paying my $8 a month.
In fact, I paid a monthly fee for checking from September 1987 until June 2004. For 202 months -- nearly 17 years -- I paid $5 or $8 a month to have a checking account. In 2004, as part of my financial awakening, I closed my accounts at the bank and moved them to a local credit union. The credit union never charges me fees at all.
During the first episode of "The Personal Finance Hour," I mentioned this story. As I spoke, it occurred to me that the "free" Frisbee wasn't really free. Not even close. Roughing out the numbers, it's clear that this one poor choice alone cost me about $1,500 -- enough to buy hundreds of Frisbees.
Related reading at Get Rich Slowly:
- How to turn $500 into $7 the hard way
- 27 money tips for college students
- Making the most of your checking account
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