Banking can be an expensive business but there are ways to cut costs.
Not many people realise that by keeping a minimum deposit you avoid paying all or at least some major charges. Banks offer a variety of packages on their different accounts which will reduce costs.
These include special reductions for pensioners, children, young adults and, often, for people over 55.
Also, if you don't pay the charges, you don't pay VAT on the charges. VAT of 14 percent on financial service charges was introduced in the last budget.
It is not a decision you must rush into. There are a number of factors you must consider first.
* Matching accounts to the level of service required: Before you look at how to reduce costs consider the type of account you need.
If you need somewhere to keep your money in safety and only have a few transactions a month you do not need a cheque or current account. You would open a savings account, which also has comparatively lower charges.
If you require a high service account with a cheque book, overdraft, stop and debit order facilities then you face higher charges.
* Weighing up turnover and loss of interest: If you have a low turnover in your account and your bank charges are low then you probably should stick to paying the monthly charges. If you have a high turnover then a minimum deposit could save you money.
You must weigh up the earnings you could make on the minimum deposit, invested for example in a unit trust, compared with the money you will save by keeping a minimum balance. In other words, a minimum deposit does not give you free banking but can reduce the costs.
* Remember, if you opt to pay the full service fees, the more transactions you make the more you will pay.
So rather than draw a number of small amounts from an account budget carefully to cut down the number of transactions.
This is also important for reducing another tax take-off from your account. Every transaction costs you a 15-cent government levy. This goes up to 20 cents on June 1.
Not much but why give it away.