Few things feel worse than finding out you spent more than you had to. It’s easy to spot a sale you missed or coupon you forgot to redeem, but when it comes to the financial industry, it’s tough to know if you’re getting a deal or being ripped off.
Here are seven financial services you should never pay for, either because there are plenty of free alternatives or they’re outright scams.
1. Checking Accounts
Banks are businesses ― they exist to make money. And, as you probably know, one of the ways they do that is by charging fees. Lots of fees. As a result, free checking accounts have been dying a slow, painful death over the last several years as more financial institutions charge customers for the privilege of owning an account.
Even so, free checking hasn’t gone extinct yet. According to Bankrate, 38 percent of banks and 82 percent of the nation’s largest credit unions still offer free checking. For many others, the requirements for avoiding a monthly maintenance fee are fairly simple.
“There are many ways to qualify for free bank accounts, depending on the institution,” said Jirayr R. Kembikian, a certified financial planner and managing partner at Citrine Capital in San Francisco. Kembikian noted that when he worked in the banking industry, customers would pay anywhere from $5 to $30 just to have a checking account. “Sometimes the fix was as easy as having a bank associate link the [checking and savings] accounts properly to qualify for free banking.”
If your bank doesn’t offer a free checking option or you’re unable to meet its requirements for free checking, it’s time to switch to one that does.
2. Credit Monitoring
You should review your credit report every six to 12 months for accuracy, according to Kayse Kress, a certified financial planner who owns More With Less Financial Planning in Bristol, Connecticut. After all, it’s estimated that more than one in five credit reports has at least one error. And then there’s always the looming possibility of fraud.
However, you don’t have to pay to see it. In fact, you shouldn’t.
According to Kress, you can obtain a free copy of your credit report from each of the three major credit reporting agencies ― Experian, TransUnion and Equifax ― once per year at annualcreditreport.com. And by staggering your reports rather than requesting all three at once, “you can get a snapshot of your credit every four months,” Kress said.
The same goes for your credit score. There are many credit monitoring services that will provide ongoing access to your FICO score, along with fraud alerts and other credit monitoring services, for a monthly fee. However, most major credit card issuers now provide customers with their monthly FICO score free. It’s often printed on your statement as well as available through your online account.
Other free credit sites, such as Credit Karma, will show you educational scores, which are often updated on a weekly basis. “Credit Karma also offers free services such as ongoing credit monitoring and notification updates,” Kress said.
3. Rental Car Insurance
Rental insurance is expensive, costing up to $19 per day. But insurance policies can be confusing, and the thought of potentially getting in an accident is scary. So when the agent aggressively pushes rental coverage and expects you to make a decision on the spot, it can be tempting to err on the side of caution and pony up.
However, as you might have suspected, paying for additional insurance offered through the rental company is almost never a good deal.
Car rental companies are legally required to carry insurance on their vehicles, but renters are not required to purchase their own insurance. In fact, the insurance offered by rental companies is not insurance at all. Rather, it’s a product sold by the rental agency known as a collision-damage waiver (CDW) or loss-damage waiver (LDW).
If you already have your own car insurance, you should have, at minimum, liability coverage already. Most individual car insurance policies will cover rentals, too, as long as the car is being driven for personal use.
There’s also a good chance your credit card offers either primary (rare) or secondary (more common) rental coverage, which kicks in after your personal coverage ends. Just keep in mind that for this credit card benefit to take effect, you have to pay for the rental with it and decline the rental company’s coverage when you pick up the car.
And if you don’t own a car, you can purchase insurance through an online agency for about half of what the rental agency will charge you, though you might want to look into a non-owner’s policy first.
4. Student Loan Repayment Help
The world of student loans is downright absurd. The system is complex, the myths are plentiful and there are few places you can go for straight answers. So, of course, there are companies out there looking to prey on confused, desperate borrowers.
According to Justin Chidester, owner of Wealth Mode Financial Planning in Logan, Utah, you should never pay a third-party company to help you apply for any alternative repayment plans, such as income-driven repayment or direct loan consolidation.
“Many for-profit companies will imply that they have the authority or knowledge of how to broker or mediate options for you,” Chidester said. “They target unknowing recent college graduates who don’t realize that all these options are available to them [for free] and they simply need to communicate with their servicer about which one they want.”
In other words, none of these companies do anything that you can’t do for yourself. If you want to switch payment plans or consolidate your loans, talk to your student loan servicer about your options or apply directly through the Department of Education.
5. Assistance Setting Up A Business
Similar to student loan assistance scams, there are companies that charge fees to fill out paperwork you can take care of yourself ― free ― when getting your business set up.
“A lot of these companies charge [exorbitant] fees to fill out a single form from the secretary of state,” said Adam Beaty, a certified financial planner at Bullogic Wealth Management in Pearland, Texas. “These companies are not drafting operating agreements ― they are filling out LLC forms.”
In fact, Beaty shared that one of his clients paid $325 to simply obtain an EIN for his company ― something he could have requested directly from the IRS website. “They are free, they only ask a few simple questions and you will receive your tax ID instantly online,” Beaty said.
Launching your own company can seem like an overwhelming process, especially if you’ve never done it before. It’s no wonder entrepreneurs fall victim to these types of scams. However, while you might want to consult a professional when it comes to devising your business plan or deciding how to structure your company, know that the steps for registering a business are fairly straightforward and don’t require you to pay a third party.
6. Currency Exchange
When traveling internationally, it’s a good idea to keep some cash on hand. But don’t stop at a currency exchange kiosk to exchange your money for local currency.
“Using this service is rarely a good idea, as a combination of fees, commissions and unfavorable exchange rates can quickly lead to an expensive transaction,” explained Matthias Giezendanner, founder and wealth adviser at San Francisco Wealth Planning. For example, a kiosk could charge as much as $43.99 for a $300 transaction.
Giezendanner said that many banks now provide checking accounts with worldwide ATM fee reimbursement. “Bring cards for at least two banks and call the banks to let them know that you will be traveling beforehand so that they don’t freeze your account,” Giezendanner said. “On arrival, skip the currency exchange and withdraw directly from an ATM. It’s a good idea to keep the receipt so you can document exactly what the paid fee was.”
Another option is to exchange cash at your local bank a few days before your trip. Most major banks will allow you to order foreign currency over the phone or online, then pick it up at your branch a couple of days later. Keep in mind, this service often comes with a delivery fee on top of the exchange fee, but some banks will waive it for their best customers.
7. Budgeting Tools
“There are so many mobile apps and online tools available for free to anyone looking to create a personal budget,” said Samuel Wieser, CEO of Northman Financial, in Cheyenne, Wyoming. “Many of these offer account aggregation, which, if you understand and accept the risks of using, make tracking spending effortless.” Some of those apps include Mint, Wally and Clarity Money. Even the more robust, paid apps, such as YNAB, have free versions.
However, Wieser also suggested that you give a shot at creating your own personalized budget with software such as Excel, Numbers or Google Sheets. “I recommend many clients start with a manually created budget,” Wieser said. “It forces them to categorize and track their spending so they are more cognizant of where their money is coming from and where it is going on a daily basis.” Typically, Wieser advises that his clients manually track their spending for at least a month before switching to a more automated service.