in Banking, FS

The $1500 Frisbee

It’s April Fools’ Day! In 2007, I regaled you with lifestyles of the rich and stupid. Last year, I explained how to turn $500 into $7 the hard way. And this year I offer you yet another tale of my own financial foolishness.

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. Since 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 move to a few years earlier. I asked. They said no, the only account available for me was the one I had. I accepted this 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 $1500 — enough to buy hundreds of Frisbees.

Photo by akeg.

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52 Comments

  1. Great example of how we can be complacent with monthly fees (heck, they’re so small, it doesn’t really matter, right?). Thanks for showing how it REALLY adds up!!

  2. I’m assuming this is Bank of America. My fiance had an account with a local bank over a decade ago, and it got bought and rebought multiple times. Recently BoA took over and they started charging the fee with no free option. We canceled the account right away.

  3. Sigh. What a painfully similar story to my own. I didn’t keep the account for _that_ long, but I think this is a common tactic for banks: targeting young, dumb college students.

    I got a free T-shirt out of mine. Even less fun than a frisbee.

  4. I got my first college bank account at the bank with the nicer building. I switched before I graduated, but it was nice banking there. It was a Louis Sullivan building.

  5. Actually, if you take into account the future value of that money (even at a paltry 4% discount rate, slightly more than inflation), you’re looking at over $2000 for your frisbee.

  6. I’ve never understood why people bank at banks. Not only is my credit union checking account free, it pays interest on balances over $500.

  7. i use BoA, no fee as long as I transfer $25 into my savings monthly. and I can transfer it right back out if I wish. not sure why everyone on the internets hates BoA so much, but i’ve always had great service from them.

  8. I have had BoA since 1999 and have had no issues with them and have never once paid a fee for my savings or checking account with them. I agree with #12…never understood why so many people dislike them.

  9. I opened up a business checking account with Wells Fargo a few months ago and I thought it was FREE. But I just got a letter saying I am not reaching the minimum number of accounts with them so I’ll be charged – do you have any advice?

  10. This story ties in nicely with the last post about the 4th graders. You were ignorant about personal finance and you were susceptible to advertising, even though you were smart enough to go to college. I think your story makes a strong argument for including some kind of financial knowledge a part of the K-12 curriculm.

  11. I’d be afraid to find out how much money I have wasted over the years on things like this. I think the buy (insert product here) for only $20 a month has been my worst offense. Later when I read the fine print I find out that it is 19.9% interest. That is of course after I bought it.

  12. Good story with an excellent lesson! I hate monthly / yearly fees & taxes. I don’t even have cable TV because I’d rather save the money to fuel my computer / movie entertainment fund. Some people are extremely surprised and say I could get a good package for just $50 a month. But then I multiply by 12 and realize it’s $600…and what I could do with $600! Every time I see a monthly charge I multiply by 12. If I still think it’s worth it I go for it.

    Also many shows you can find online, even legally. Oftentimes at poorer quality however.

  13. I had the same issue with my car insurance for a long time. The company I was with claimed that they had the best deal and it was all I could get.

    A single afternoon spent comparing quotes revealed they were overcharging me 20%. I wish that I could get back the money I overpaid for those 3 years.

    It just goes to show that you have to be on your toes when comes to finances.

  14. One thing I appreciate about these stories is that they make me feel better about my own (no less minor) financial mistakes. Thanks for sharing.

  15. $1500 is a LOT of pizza and beer!!!!!!

    Small costs that add up to big costs are one of the biggest things I see derail my budget/savings plan

    Most common (costly) mistakes:

    1) Paying annual fees on credit cards. (Companies are so competitive, just go find someone else)

    2) Not asking. (Want that overdraft fee waived? Want to lower the interest rate on your credit card? Want extra time to pay your taxes? All of these can be negotiated. No, really.)

    3) Not shopping around. (Before diving into bank accounts, electricity companies, rent, consumer goods, or any other large choice, check out at least a few options. Note: There is diminishing returns on this advice. Spending 10 hours deciding what TV is best is not necessarily worth your time).

    Can anyone else think of mistakes they or friends have made?

  16. This is such a great post for those people that say saving $5 a month isn’t worth the hassle. I’m happy to say that I’ve always been cheap and paying even $1 a month was never worth it for me for anything. I’m glad my parents always taught me to weigh even the hidden cost of something.

    Mr Chiots on the other hand was just like you, until he met me of course. He’s spent his fair share of money on items he can’t even remember.

  17. I have a similar conversation with my colleagues almost every day on the ‘why do you always bring your lunch?’ topic. $5 a month sure adds up… but what about $5 a day?

    The worst part is that you’re just looking at it as $5 even… not counting compound interest that could have accured if you’d put it in an interest bearing account.

  18. The other day I was thinking about the t-shirts and other assorted crap I filled out credit card forms for. Luckily I’ve stayed away from credit card debt despite the craziness.

  19. Good story. I’m always faintly amazed at the antics of US banks. Here in the UK, I did a similar thing when I joined HSBC as a student in 1995. I can’t even remember what the gift was. However, there were no fees at all, and they gave me an interest-free overdraft for my entire student life. I think I once got charged about £30 for exceeding my overdraft limit, but the overdraft facility itself cost nothing as long as I stayed within the £1500 limit. Free money, basically. I still keep a current account there based on the good treatment I got all that time ago, though I don’t keep much cash in it as the interest rate sucks.

  20. Thanks for posting this. After reading this I finally got around to calling my credit union and switched to free checking. I had been on “premium” checking for years now, at the cost of $6/month. I’ve been meaning to call and switch back for a long time and reading about your $1500 frisbee finally gave me the push I needed to take action. Much appreciated!

  21. Wow – that’s incredible! I’ve always avoided bank fees with vigor, but it’s always interesting to see how those kind of things can sneak up on ya.

  22. I pay slightly higher fees at my credit union but I bank with an environmentally and socially sustainable credit union that is carbon neutral and offers so many benefits to the environment in comparison with other financial institutions.

    $1500 extra for a healthy planet seems like a bargain to me…

    I just wrote an article about this actually. It would be interesting if you could address this: the significance of private wealth vs the significance of the planet’s wealth. What is more important: a healthy earth or a healthy bank account? You tell me…

  23. I have an MBNA gym bag to show for the thousands I paid them in fees over 5 years before I wised up and switched back to the hometown credit union. Seriously, campuses should ban major banks/credit companies from campus, not allow them to set up at every freshman event!

  24. Truth above, thousands in fees actually represents INTEREST on the credit card I maxed out as well as yr. standard $8 per month checking account and various instances of overdrawn fees. I was bad back then…but hopefully, and with the help/inspiration of blogs like yours, I’ve learned a little since then!

  25. Thanks to student loans that just won’t go away, I know we’re still paying 8%+ interest on things we threw out 5 or even 10 years ago.

    Until we’re debt-free, I’ve tried to get us in the habit of mentally doubling the price of everything we consider buying to see if it’s still worth it, because that same money could be paying off debt that will be compounding interest for years to come.

  26. Ouch! You should frame that frisbee with a note as a reminder to all who see it 🙂

    Great story, even if painful to hear about.

  27. Well I got my first credit card; in college, because I wanted to talk to a cute girl. I’d never been able to get one before so I filled out the app, while chatting her up, thinking nothing would ever come of it. I about had a brick when it came in the mail 2 weeks later. What a pain in the neck that turned out to be. And I never saw her again either.

  28. Funny how things look when we take the time to look back on them . . . I often want “do-overs”, but they aren’t coming anytime soon . . .

  29. Opening an account at the credit union where I worked years ago was the best banking decision I’ve made. I’ve been a member for nearly 20 years and I currently live 200 miles from their brick and mortar location. I use ATMs and online banking so distance is not an issue. I don’t recall ever finding a mistake on my accounts, and I have free overdraft protection. Conversely, I have a local bank account for a home business I started a few years ago and they charge $5 per mo. when the balance falls below $500. They also sold my name and address to every credit card company on the planet. And for some reason their systems can’t post checks for the correct amount! Their idea of service with a smile includes taking cash from my pocket. My credit union didn’t offer business accounts at the time I opened the account, or I wouldn’t have opened the local account. If anyone has access to a credit union at least check them out – I’m sure glad I did.

  30. Wow, that’s just incredible, how easily little fees can add up when we don’t take action. Hopefully, your tale will prevent others from ‘spending’ so much for a frisbee (or toaster, or any other bank giveaway).

    Do you still have the Frisbee, by any chance? I can’t think of a more concrete reminder of the importance of looking past marketing gimmicks when choosing projects or services. (Plus, you’ve got a lot of Frisbeeing to do in order to get your money’s worth out of that flying disk…)

  31. Wow. This story makes me appreciate my mom even more. She opened a checking account for me (in both our names but my name only on checks) my senior year of high school. She got me a student account, which had a $99 minimum balance (which I think she put in for me) and paid interest with no monthly fees.

    The first year, the only checks I wrote were to her to pay for my long distance calls to my boyfriend 800 miles away at college.

    When I got to college, I immediately opened up a savings account so I could write checks into it and get money out of the ATM without any fees. When the first bank started limiting how many withdrawals I could make a month without a fee, I changed banks in protest.

    I’ve never paid a monthly fee for banking, ever. I got my checking account in 1984. I always get interest paying accounts, even if the interest rate sucks.

    I’m grateful to my mom for getting me started on a good path financially and teaching me how to be frugal. Sure, I splurge on things I want badly enough, but I make sure I get a good price and I never, ever, ever buy anything I can’t afford. I’ve never had credit card debt, and the only debt my husband and I have these days is a mortgage.

    Thanks, JD, for sharing this story. And kudos to you for learning lessons from it so you’ll never get into that situation again. 🙂

  32. This sounds so familiar. I worked at a retail store my senior year of high school and had saved $3000. I had no goal for it. I went to college, and went crazy on snacks and the thrill of buying without having to ask anybody’s permission. Within three months, I had spent $2000 of it on total crap. I don’t even know what. I’m sure I don’t have anything to show for it anymore.

    It still feels like a total blackout. How incredibly stupid I was, and what I would give to have that $2000 back again.

  33. This story reminds me of one of my own. I was brought up by frugal parents who gave me good financial sense, so I never did anything ridiculously stupid with money, though even I signed up for the free T-shirt in college – I figured I would get a free T-shirt and cancel the credit card, and didn’t realize it would affect my credit score. Sigh. It was an ugly T-shirt too!

    My worst moment was going down to New York City to visit a friend during high school. I grew up in a small town and had no experience with the city (not that that is any excuse for foolishness). I was standing outside Grand Central Station waiting for my friend, and I was approached by a salesman. I didn’t realize he was a salesman at first, he was just very friendly and complimentary. Eventually he told me that he had these gift certificates for beauty services worth much more money than the certificates would cost, at a fancy New York salon. He would give me the gift certificate worth $200 for only $75. I had a crisp hundred dollar bill in my wallet that I was meant to use for buying a prom dress. Somehow, even though I had never used beauty services in my life, I was convinced that this was a deal. I didn’t even live in New York, so when would I use these certificates? Not only that, I took the word of some guy on the street and handed him money for something that was probably a total scam. I never used the certificates of course, so I don’t know. I still cringe thinking about how blindingly stupid I was. I had to re-wear an old dress instead of getting a new prom dress. I never told anyone about this street deal, not my friend who was street-savvy and would have laughed at me, and not my family.

    You ought to do an article on how to think about sales pitches in various situations, because I see things like this come up all the time, i.e. want to join our special customer’s club for the low cost of X? want to get the premium protection plan for this product at the low cost of X? Even the frugal can be fooled if they make you think you’re getting a ‘deal’…..

  34. Oh, the lessons we learn in life. My bank was recently acquired by good old B of A. Until the takeover, I had free checking with direct deposit. Last month, that disapeared and now I have to maintain a $750.00 balance to qualify. I had to go the nearest BofA office and “negotiate” a better deal. B of A reinstated my free checking with direct deposit when I showed them a list of banks I could move my account to that do offer free checking with direct deposit.

  35. Gosh, that’s quite an insight! Like GBN, I can’t imagine why anybody would do business with a bank instead of a credit union. I’ve never been ripped off by a credit union, but sure have had some interesting transactions with banks!

  36. I was that typical sales woman for a credit union for three years while I was in college. It is a great financial institution and I currently have the account now 2 years later past my graduation date. You may want to check them out because they have great rates and reimburse you up to $4 a month to when you use non-affiliated ATMs (other then credit unions within the company’s agreement. You can check out for yourself and apply if you qualify under their agreement at http://www.psecu.com.

  37. oh my gosh, i have fees on my checking account! im totally going to fix this….

    thanks for the post!

    Caleb
    themodernmanblog.org