Canadian Bank Fees: The Good, The Bad, and The Ugly

Banks are in the business of making money and one of the ways they do this is by charging fees for using their services. You can be charged for having a simple chequing account, for purchasing something in a foreign country, and for sending a friend an electronic transfer to cover your share of last night’s dinner. Often bank fees can feel like just another required cost that all consumers must pay, especially since Banks rely on the fact that most consumers value convenience above all else and therefore will often put up with most banking fees. This doesn’t need to be your reality, let’s take a look at how bank fees are charged, what they mean for your finances, and how you can plan ahead to avoid the most expensive ones.

Want to switch banks? Learn how to close a bank account.

Banks Fees To Look Out For

Unfortunately for you, the consumer, banks tend to like to charge a fee for just about everything, here are some of the most common fees you should look out for:

• Monthly accounts fees
• Minimum balance fees
• ATM fees
• NSF (Non sufficient funds) fees
• Overdraft fees
• Foreign transaction fees
• Lost card fees
• Paper statement fees
• Electronic transfer fees

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Monthly Accounts Fees

These are one of the most common fees banks charge their clients. Whether you open a chequing or savings account, you’ll usually have to pay a fee each month to keep it open. Depending on the account features, the fees can range anywhere between $3 to $30. 

Looking for a chequing and savings account? Try out a hybrid bank account.

Minimum Balance Fees

Some banks will waive your monthly account fees if you maintain a certain balance at all times. Depending on the bank you’re with and the account you have, the minimum balance you must maintain will vary.

If your balance falls below the required minimum, you’ll be charged the monthly account fee, which is called the minimum balance fee. 

ATM Fees

In general, the majority of banks will allow you to withdraw money from their ATMs for free. However, if you use an ATM that is not associated with your bank, you’ll usually be charged a fee that can easily range between $2 – $5. 

Check out how much the Big banks in Canada charge for ATM withdrawals. 

Non Sufficient Funds (NFS) Fees

NSF fees can be quite dangerous as each NSF fee can range between $25 and $48. Banks charge this fee when a transaction, like the cashing of a cheque, can’t be completed because you don’t have enough money in your account. Moreover, if your cheque bounced while trying to pay a creditor, that creditor can also charge you a NSF fee. 

Overdraft Fees

Most banks offer overdraft protection. They charge their customers a fee so that their accounts are protected in the instance they don’t have enough money to cover a transaction. Sometimes, consumers are opted into overdraft protection and charged a fee without even knowing.

Foreign Transaction Fees

Some banks will charge a fee every time there is a foreign transaction on your account. Banks typically charge around 2.5% – 3% per transaction. This happens when you use your credit card to make a purchase in another country or when you make an online purchase in a different currency. 

Do you spend a lot of money outside of Canada? Consider getting a foreign currency bank account.

Lost Replacement Fees

If your card is ever stolen or lost, you’ll need to order a new card to replace it. Unfortunately, Banks often charge a fee to replace cards that have been lost or stolen.

Paper Statement Fees

Now that you can do the majority of your banking online and receive all your statements via email, banks have started to charge a monthly fee for receiving paper statements. These fees can range anywhere between $1 – $5 per month. 

Electronic Transfer Fees

An Interac e-Transfer is a great way to easily and quickly send money to anyone, but the convenience comes at a cost as you’ll be charged a fee every time you send one. 

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The Best Way To Avoid Banks Fees

Planning ahead, reading the fine print, and making sure you’re knowledgeable about the banking services you’re using, are the three most important things everyone who is looking for free banking should do.

1. You need to be aware of what’s going on with your account.
2. Find an account that allows for zero monthly fees once you meet certain criteria.
3. Then meet those criteria.
4. While convenience is often tempting, if you’re truly invested in having free banking you need to make sure you don’t succumb and instead make choices that support your goal.

Since there are so many types of chequing accounts that come with a variety of different fees, the process to get the free bank account you want will be unique to your banking situation. Figure out what your needs are based on your income and how much money you have, do some research, and you’ll definitely be on your way to conducting fee free banking.

Need to save up before you can maintain a certain balance in your account? Check out our saving guide.

Open An Online Bank Account 

Online-only bank accounts often come with no monthly fees as well as added perks such as free e-transfers and the ability to earn interest on your balance. If you’re looking for a no fee bank account, check out Equitable Bank. They are one of the most well known online-only banks who offer a variety of everyday banking and investment accounts including, savings accounts, TFSAs and RRSPs.

Their Savings Plus Account is a hybrid bank account as it resembles a high-interest savings account while maintaining the flexibility of a regular chequing account. The account lets you earn 1.25% interest on your balance which is calculated daily on your total closing balance. This is a lot higher than most traditional banks who offer around 0.05%. Moreover, it’s also free from typical bank fees including monthly account fees, e-transfer fees, and NSF fees. Users are also free to make bills payments and electronic fund transfers. 

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What Free Banking Means For You

Free banking is not a given, it’s up to you to create a plan to stay organized enough to get the free bank account you want. Let’s look at the most basic and probably one of the most common banking fees, the monthly account fee. You’re charged this fee for simply having and using a certain type of account, typically chequing. Obviously, this type of fee depends on the bank you’re with, the type of account you have, and the type of consumer you are. If you have an account that charges a $30 monthly fee, you’re technically wasting $360 a year to spend your hard earned cash.

Check out our guide on automating your savings.

If this describes your current banking situation, here’s what you can do. Find an account that is either completely free, might be difficult, or change your account to one that waives the monthly fee when you maintain a certain balance. Most banks have them; typically you need to constantly maintain a balance of $3,000 or $5,000 (varies depending on the bank you’re with).

$5,000 is not a small amount, but when you consider the amount you’ll be saving each month and then each year and then for the rest of the time you use that account, it’s without a doubt in your best interest to figure how to maintain whatever balance you need to get a free chequing account.

Thinking about investing? Try using a robo-advisor.

Free Banking Is Like Paying Yourself

If you’re still not convinced, think about it like paying yourself. Let’s say you need to maintain a balance of $5,000 to have a $30 fee waived each month, if you’re able to do this, you’re basically paying yourself $30 a month or $360 a year. You could use that money to invest in something or put into a TFSA or RRSP.

And this is only when you consider the monthly account fee. What about those pesky ATM fees, paper statement fees, and overdraft protection charges? At the end of the month when you’ve been actively using your chequing account, as the vast majority of consumers do and often with an emphasis on convenience instead of frugality, your account can become quite expensive.