Avoiding Wells Fargo's service fee

Wells Fargo (like most banks it seems) charges a service fee to have a checking account with them. They offer ways to waive the fee so that you can get effectively free checking if you meet their conditions. For most people their conditions are probably not that hard to meet, but for me, they required some effort.

Not meeting their conditions is not good as their service fee is a bit extreme I think at $12 per month. That's not something I'm interested in paying if it can be avoided. As of writing this avoiding the fee requires meeting at least one of these conditions every month:

  • Daily minimum balance of $2000
  • Direct deposit of at least $750
  • At least 10 transactions using your debit card

If you can meet those conditions each month then great, you're covered. For most people this is probably relatively easy through either having their pay check getting direct deposited or by simply using their debit card when shopping. For me however, these are not so simple to meet.

  • A $2000 daily minimum is just nuts. Some days I will have that much, but not every day.
  • I get paid via checks, direct deposit is not an option.
  • I do not do much shopping and when I do I prefer to use either my Bank of America credit card for its rewards or plain cash.

Until recently I would just try to ensure I always got in at least the 10 transactions. Typically, I'd fall short and have to go make some small transactions near the end of the month, spending money I otherwise would not have spent.

I would occasionally miss a few months but so far it seems Wells Fargo has waived the fee anyway. I'm not sure if they have some sort of forgiveness policy or what. If they do that's great, but I'd rather not rely on that being a thing forever.

How I am avoiding the fee

For the last couple of months I've been trying a new method of avoiding the fee while not having to spend money on small stuff I don't need. The downside is it ties up about $800. The plus side is I can actually gain a little money each month.

A few years ago I came across Treasury Direct.gov. They allow you to invest in treasury bills, notes, savings bonds, etc. on your own rather than having to go through some financial institution.

The way it works is you link your bank account with them and then create a purchase request. The money will be withdrawn via direct debit from your account and when the security matures it can be direct deposited back into your account.

I messed with it a few times, investing in some notes and bills but then stopped because the return was not great and some life changes meant I could no longer afford to be tying up large sums of money for long periods of time.

In August last year one of my prior long-term note investments matured, so I had an extra $1000. Around the same time I was doing my typical buy small things to avoid the fee and I got to thinking.

One of the securities available for purchase is a 4-week bill, just perfect for this situation. Each month I could submit a purchase request for $800 worth of 4-week bills. After the four weeks are up they would direct-deposit the $800 back into my account and allow me to meet that requirement, and I might even gain a little since the actual purchase price is generally less than the security value.

When buying a security they offer different ways to redeem it once it matures. For this to work you must choose to deposit it back into your checking account. If you put it in a Zero-percent C of I or try and schedule re-investments it will not work.

Because I had just receive back my prior investment I had the spare cash available to start doing this without affecting my day-to-day finances. Having the money tied up is also not a big concern for me. If I do end up needing the money I can simply not re-invest it when it matures. Worst case scenario I find out I need the money right after it gets invested and I have to wait a full month. I have enough savings / credit that that should not be a problem.

So I've been doing this for a few months now and so far results have been pleasing. I've successfully avoided the fee each month and gained a tiny amount of money. The gains may not be spectacular, but I figure it is better than spending money.

Month Amount Purchase Price Net gain APY
December 2016 $800 $799.81 $0.19 0.309%
January 2017 $800 $799.70 $0.30 0.497%
February 2017 $800 $799.70 $0.30 0.487%
March 2017 $800 $799.75 $0.25 0.406%
April 2017 $800 $799.54 $0.46 0.756%
May 2017 $800 $799.55 $0.45 0.735%
June 2017 $800 $799.48 $0.52 0.852%
July 2017 $800 $799.41 $0.59 0.964%
August 2017 $800 $799.38 $0.62 1.005%
September 2017 $800 $799.40 $0.60 0.974%
October 2017 $800 $799.39 $0.61 0.994%
November 2017 $800 $799.37 $0.63 1.035%
December 2017 $800 $799.27 $0.73 1.197%
Total gains: $6.25 0.79% avg

So over the course of a year, I managed to turn that $800 into $806.25, and avoided having to pay any service fees for my checking account. If I'd have stuck with just buying small things to meet the 10 transaction barrier then I would have ended up loosing money each month on unnecessary purchases. For an essentially zero-risk investment that's not bad in my opinion.

I also make out better than just keeping the money in savings as well. Wells Fargo's savings account pays interest with an APY of 0.01%, meaning after a year my $800 would have only grown to $800.08.

Like most investments, they caution you that it's possible to lose money. I've never seen that happen in the short time I've been using the service however, and the nature of the process makes me think it's highly unlikely to ever happen. There have been some months when I have no gain (due to rounding) but never a loss. The price per $100 for example might end up being something like $99.999315 so the purchase price ends up being $800 after rounding resulting in simply breaking even.

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