Recently, one of my clients expressed concerns about the high fees charged for transactions by various financial institutions. She did her research regarding the services and banking fees charged. In her view, the exercise was necessary to protect her investments from being eroded by fees.

She reportedly cancelled her chequeing account because of the monthly fees and the cost of cheque books. The cost of standing orders was also of concern. She recommends that customers who have numerous fund transfer transactions should minimise standing orders to just one per month and develop the habit of using the online platforms to transfer funds,

We discussed the fact that some investors or customers do not possess the discipline to make the online payments promptly each month. She suggested that the habit of transferring funds online would allow investors and customers to become disciplined in executing their financial affairs and save money at the same time.

According to her, once the discipline is maintained and customers can see the savings in executing the online transfers they can eventually discontinue standing order transactions and benefit from the savings that follow. She believes that transferring funds online to cover monthly recurring expenses or investments is simply trusting oneself.

It’s necessary to have a disciplined mindset; otherwise, poor money habits will result in more or higher fees when bills are not paid on time.

She is encouraging customers to find out from their banks the cost of transferring funds from one bank to the other and the various ways that the transfers can be done at minimum or no cost. Based on her survey, she discovered that there are instances in which some types of transfers do not attract fees.

An assertive senior and retiree who practices prudent money management, she proposes that customers should monitor fees early and not wait until retirement when fees have already made a significant dent in their resources.

Data from the Bank of Jamaica indicate that large financial institutions have increased in-branch transaction fees. Customers are urged to utilise online platforms instead. With the central bank Governor Richard Byles appealing to financial institutions to reduce interest rates to ease the burden of consumers, it’s important that the matter of fees be also addressed.

Financial institutions globally earn tremendous income from fees. Loans and investments attract fees and, in the same way that returns on investments are compounded, fees are also compounded and hamper financial prosperity for investors.

Commercial banks make most of their money from bank fees and interest on loans. Types of fees include monthly maintenance fees, ATM fees, insufficient fund fees, inactive account fees, and account closure fees.

Credit cards are a major income stream for banks, by charging high interest rates and numerous fees, such as late fees, over-limit fees, cash advances, and annual fees.

There are several ways that customers can reduce or eliminate some fees. Among them, using ATMs within your bank network can reduce or preclude fees. Avoid frequent withdrawals at ATMs. Some investment accounts attract service fees, such as withdrawal fees. Resist frequent withdrawals as the service fee can prove quite costly when compared to interest earned or returns on investments. It’s best to make a projection of funds needed and make a single withdrawal rather than make frequent withdrawals over a short time. Early closure of the account may also attract a service fee. Though wire transfers are convenient, frequent withdrawals can prove costly.

Keep abreast of transaction fees. It’s best to be informed of the financial institutions’ transaction charges at the time of opening the account, instead of being surprised by the charges later. Because fees compound, the negative impact on your investment growth can be significant in the long run. Low fees support higher returns on investments. However, fees are a component of investments. When it comes to investing, investors should choose funds that have an excellent track record of investment performance over the long term and sound management practices.

Personal finance expert and author Dave Ramsey said: “Don’t get fixated on finding the funds with the lowest fees that you end up stepping over dimes to pick up pennies.”

On the subject of retirement planning, low fees are desirable, as a greater portion of pension funds is invested to maximise returns on investments for the long term. Adhering to a budget will assist in curtailing spending and avoiding unnecessary fees, which augurs well for retirement savings. Having an emergency fund in place can alleviate much stress when an emergency arises without depleting funds earmarked for retirement.

Inflation and high fees are a dangerous threat to retirement savings. Bank of Jamaica forecasts for the next two years indicate the inflation rate to be within the 4 per cent to 6 per cent target range. We can’t escape inflation, but it’s in our power to avoid high fees.

“You must gain control over your money, or the lack of it will forever control you,” wrote Ramsey.

Grace G McLean is a financial advisor and retirement specialist at BPM Financial Limited. Contact her at gmclean@bpmfinancial or visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at livingaboveself@gmail.com.

Reduce trips to ATMs, especially outside your bank’s network, to avoid fees.