Canadian banks and their never ending bank fees! Every year, we hear of banks increasing their fees and blaming it all on the “competitive nature” of the market, rising costs, inflation, and so on.
Banks are expected to seek the highest possible profit (while operating within the confines of the law) for their shareholders, and they have been doing a great job at that, with stock prices, earnings and dividends all trending up.
I’m a strong believer in free-market systems. However, for the everyday bank customer, recent and ongoing hikes in bank fees may look very much like “price gouging” and requiring some type of intervention. Recent complaints by bank staff that they are “being pressured to upsell, trick and lie to customers” in order to meet unrealistic sales targets do nothing to allay anyone’s fears that something isn’t right!
So, do I want to shell out an average of $216 annually in bank fees? Definitely not! By the way, according to numbers from Statistics Canada, Canadians paid an average of $216 in bank service fees in 2015. That’s just ridiculous! Currently, the Big Banks charge monthly chequing fees ranging anywhere from $3.95 to $30 per month.
Some of the fees you encounter when banking today include: The monthly chequing account fees, ATM fees, interac transfer fees, foreign transaction fees, cheque book fees, fees for debit transactions over the monthly limit, stop payment fees, Non-Sufficient Funds (NSF) fees, overdraft fees, paper statement fees, cheque certification fees… there is no end to the fees you can be charged by a bank these days.
Options to Avoid Some Bank Fees
There’s no way to avoid all bank fees, however, here are some savvy strategies to minimize the fees you pay for your everyday banking:
1. Open a no-fee online (digital) bank account
Digital banks like PC Financial, Tangerine, Alterna Bank, and Motive Financial have been around for a while. Try one of them out! Their chequing accounts generally come with no monthly fees and unlimited transactions. Not just that, you also get paid interest on all your balances (both chequing and savings). There are definitely pros and cons to banking with these online banks, and I mention those later in this article.
2. Keep the minimum chequing account balance
To avoid the pesky monthly bank account fees, some banks require you to keep a minimum balance in your chequing account. For example, for the CIBC Everyday chequing account (limited to 12 transactions/month), you can waive the $3.90 monthly fee by maintaining a minimum end-of-day balance of $2,000 each day during the month. Mind you, banks keep raising the minimum balance, and since they are not paying you interest on your balance, this is money sitting idle and not working for you!
If you want to stay with your bank and avoid the monthly fee, consider maintaining the minimum balance to qualify for a fee waiver.
3. Multiple-product rebate
Some banks will offer fee waivers when you open multiple accounts with them e.g. credit cards, investments (GICs, mutual funds), and mortgages. For example, monthly fee for the RBC No Limit Banking account is $10.95, however, you can have the fee waived or reduced depending on the number of other accounts you have with RBC. I currently pay $5.95/month for this account after accounting for the credit card and investment account I have with RBC.
4. Negotiate a discount
Everything is negotiable. Whether or not the negotiation is easy is another thing. – Carrie Fisher
If you are a client in good standing, you may be able to negotiate a good deal. Consider discussing your concerns with your bank and they may be willing to offer you alternatives that suit your needs at reduced or no cost. Personal finance blogger, Robb Engen, was able to negotiate such a deal with TD.
5. Join a credit union
Credit unions or “caisse populaire” as they are know in Quebec, often have more favourable fees than the big banks. Look at their offerings/rates to ensure that fees are lower than what you’re currently paying. An additional perk when banking with credit unions is that you’re a member and qualify for a share of the profit.
Pros of a Digital Bank vs. a Big Bank
- No-fee bank account with unlimited monthly transactions
- Earn interest paid monthly on all balances (both savings and chequing)
- Higher interest rates on savings accounts
- Free unlimited cheques (PC Financial)
- Earn bonuses (Tangerine) and or points (PC Financial) on account opening
- Earn bonuses for referring new clients (Tangerine). Open an account with Tangerine today to save and use my Orange key code (43979980S1) to get a welcome bonus of $50!
- Better rates for lines of credit and mortgages.
Cons of a Digital Bank vs. a Big Bank
- Not Brick and Mortar: Some people feel that traditional banks are more “secure” because brick and mortar convey increased security of their money. And, you know, the internet is too risky 😉 This is a myth. Deposits (up to a maximum of $100,000) in both digital and traditional banks are protected by the Canadian Deposit Insurance Corporation, and most things are connected to the internet now, anyways.
- Less Personal Touch: If you prefer to deal directly with a bank teller or financial advisor at all times, then a digital bank isn’t for you. Some digital banks have limited options to meet fact-to-face with a staff – PC Financial have pavilions and Tangerine have cafes. However, these face-to-face outlets are limited in number.
- Some Transactions May Take Longer: It’s definitely easier to complete some transactions in a traditional bank. Examples include purchasing traveler’s cheques, requesting smaller change, depositing and withdrawing cash, etc.
If you want to compare chequing accounts and fees across several banks (traditional and online), this comparison tool from Ratehub is useful.
There are many good options out there for those who want to avoid paying monthly bank fees. Fees add up! Consider a scenario where you are paying $30/month. That equates to $360 in bank fees annually – money you could contribute to a tax-free savings account or RESP.
Alongside my RBC account, I’ve been trialing PC Financial for a while now. Due to multi-product rebates, my monthly banking fees are not painful enough to make me close my RBC account yet. However, with increases in fees occurring every year, my threshold for accommodating this additional cost will soon be exceeded.