How Can I Get a Bank Account for Cheap or Free In Canada?
It’s no secret that the older you get, the more money you’re going to spend. Unfortunate, but true. As you progress through life, you’ll add more and more financial notches to your belt. You might put yourself through school, buy a car, maybe mortgage a house and start a family, all of which you’ll need to work hard and earn money for. But, the first big financial step that almost everyone takes, besides earning an allowance for mowing the lawn, of course, is to open a bank account and start storing away your savings. The only problem is, in Canada, common bank accounts range in all sorts of prices. Some, such as all-inclusive accounts, cost more than others but come with added benefits like free safety-deposit boxes, cheques, and unlimited transactions. With some account packages, you might even gain access to free rewards points credit cards that normally cost upwards of $100 a year. However, you’ll obviously need to pay up for them. In fact, Canadian banking fees have risen steadily within the last few years and a lot of people aren’t happy about it.
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Most all-inclusive bank accounts cost close to $30 per month, meaning you could end up spending well over $300 a year in standard banking fees alone, if you don’t manage to maintain a minimum monthly balance that is. However, the minimum balance for most typical all-inclusive accounts is $5,000, which isn’t always a possibility. If you dip below that limit, you’ll be charged a penalty equal to one month’s fee. While some clients are satisfied with that idea, not everyone can afford or wishes to pay that much just for the security of knowing their money isn’t stored under their mattress. In that case, there are actually a bank accounts you can get that are cheaper, even free in certain cases. So, if you think you’re paying too much for your current bank account, or you’re just interested in knowing how to get a cheaper, possibly free one, keep reading.
Banking Institutions That Offer Low-Cost Accounts
There are a number of major banking institutions in Canada and most of them offer some form of low-cost account for those who either can’t afford the more expensive ones or simply aren’t interested in the extra perks. No fee, online banking is also becoming readily available to consumers, but we’ll discuss that in the following section. Currently, there are 5 main banks that the vast majority of Canadian clients are with:
When you sign up with any bank, it’s important to listen carefully and discuss all the details about each type of account they offer. For the big banks especially, the employee you’re dealing with, usually a manager, will present you with all sorts of gratuities to sell you on their all-inclusive and ultimately most expensive package. After all, they’re businesses first and they need to employ sales tactics to wrangle you in as a client. However, just because an offer sounds appealing, doesn’t mean you should jump on it right away. Remember, while you might be steadily employed, earning a decent salary at the moment, and $30 a month doesn’t bother you, you never know what could happen. A sudden loss of employment could land you in a position where that extra money could’ve helped greatly. For that matter, all that money you’re spending for things you might not even use could’ve been going into a tax-free savings account or your RRSP (Registered Retirement Savings Plan) for the future.
So, before you sign-up, ask yourself certain questions. How often do you write physical cheques nowadays? Will you be paying for overdraft protection? Are you the type to take advantage of a rewards credit card? Are you ever going to use a free safe-deposit box? Another common sales tactic the manager might use will be to tell you the cheaper accounts only give you something in the realm of 12 transactions per month. So, how many transactions a month do you tend to need?
For more information about avoiding NSF and Overdraft Fees, click here.
If you don’t want the all-inclusive account, they’ll offer you something in between. For example, TD has their “Everyday Account”, which is $10.95 per month and the fee is waived when you maintain a $3,000 minimum monthly balance. Fewer perks, but a more reasonable price. Still, there’s likely going to be a point in your life when every penny counts, especially if you ever decided to purchase a house, so it’s best to save as much as possible whenever you can. If you fall under that $3,000 dollar balance, you’ll be charged the $10.95 each month until you can get back above that limit. Therefore, no matter what bank you’re at, if you think you might be in danger of dropping below the minimum monthly balance limit, ask about their cheapest possible account (if they don’t have a free account). Usually, their most basic account will be $4.00 a month or under.
You might also be able to get a low-cost, basic account for free if you’re:
- A full-time student
- A youth (under the age of 18)
- A senior citizen benefitting from GIS (Guaranteed Income Supplement)
- A recipient of RDSP (Registered Disability Savings Plan)
For a more extensive list of low-cost or no-cost accounts offered in Canada, visit the Government of Canada website.
Banking Institutions That Offer Free Accounts
As we mentioned, there are certain cases where a customer at one of the major Canadian banking institutions will be eligible for no-fee banking. However, unless you’re a student, a minor, or are receiving one of the above benefits, you’re not likely to qualify a no-fee traditional chequing or savings account from most of the big-name banks. So, if you are the average Canadian and are looking to get free banking, there are places where you can find such services. Most of these operations are based online and are becoming an increasingly popular alternative to traditional banking.
When the idea of free online banking is brought up, the organization that usually comes to mind nowadays is Tangerine. Formerly known as ING Direct, the company was founded in 1997 and is now owned by Scotiabank. While Tangerine does charge its clients for some general banking services, such as additional cheques (the first booklet of 50 cheques is free, but any subsequent are $20 per booklet), non-sufficient funds and negative balances, with their No-Fee Daily Chequing Account, you won’t be charged for any transactions or debit purchases you make. They also offer other traditional banking products, such as mortgages, savings accounts and mutual funds. Like any normal bank, customers will also be given a personalized debit card. True, their business is mostly based online (no physical branches to visit), which can be an inconvenience to some. However, since they were bought by Scotiabank in 2012, Tangerine ATM machines and locations have been popping up across Canada. You can also use Scotiabank machines to complete any on-site transactions you might need, such as withdrawing cash.
Another popular, online no-fee banking program is Simplii Financial, which is currently owned by CIBC. Originally known as President’s Choice Financial, the company will be rebranded as of November 1st, 2017 and all of its current clients will have their accounts transferred to the new brand sometime before March 31st, 2018. While President’s Choice ATM machines, associated with the Loblaw grocery store chain, will slowly be replaced or removed entirely, current and future clients should receive most of the same benefits they had before, including a new debit card, free banking and similar interest rates. Like Tangerine, Simplii users will also be able to make basic transactions using any CIBC machine.
Unlike Tangerine and Simplii, the EQ Bank business is exclusively online (no physical branches or locations) and only offers one type of account, the Savings Plus Account. While they don’t offer any debit cards or cheques, they do supply their customers with a no-fee savings account with an attractive interest rate of 2.3% (currently). The company itself, Equitable Bank, also deals in mortgages and other types of commercial lending, and has offices located in Toronto, Calgary, Montreal, Halifax, and Vancouver. It also offers its customers unlimited free transfers and withdrawals.
A credit union is similar to a bank, in that its clients are able to open chequing and savings accounts, as well as access other kinds of financial products. Where credit unions differ from traditional banking institutions is how their profit margin works. Where a bank earns a profit from their customers paying for their services, credit unions are nonprofit cooperative organizations, owned and operated by the members themselves, rather by stockholders. The profits they do make are gradually returned to their members through lower lending rates, more reasonable banking fees, etc. When it comes to chequing and savings packages, some credit unions, such as Conexus and Coast Capital do offer no-fee accounts. Another appealing incentive are their high-interest savings accounts, which often have higher rates than the average bank. However, for most credit unions, potential members need to pay a certain fee for the membership itself. They also offer a less extensive variety of financial products and fewer locations.
Check out our guide to automatic savings and automatic payments.
No Banking is 100% Free
When it comes to storing your money away, another important thing to keep in mind is that no banking is completely free of charge. Once again, all banks are businesses, whether they’re based out of physical locations or entirely online. They have to charge you for something, otherwise they wouldn’t be making any money. While Tangerine’s chequing accounts are free, they do charge you $45 if you want to transfer your funds to another banking institution. Then again, like any bank, they’ll throw in some incentives to earn your business, such as a $25 signing bonus for opening an account. You also don’t have to keep all your money in one place. While one bank might offer better rates for their accounts, another might offer better rates for lending. This means you could store your money in one bank and secure a mortgage through another. In the end, every bank or credit union comes with benefits and drawbacks, so be sure to shop around before making your decision.
For more information about Canadian bank fees, read this.
Maintaining a Minimum Balance to Save Money
One very basic way of saving money when it comes to banking fees is to… well, save money. As we mentioned earlier, many chequing account come with an option to maintain a minimum monthly balance in order to have fees waived. Keeping this up is a good way to promote healthy spending habits. Not only will you be saving on banking fees by not spending the money in your account, you’ll also be forcing yourself to save more in general.
Want to save more and spend less on your own terms? Click here.
Negotiate For a Better Deal
Keeping all this in mind, there are certainly ways that you can reduce your banking costs by a few dollars here and there. Most bankers are open to a bit of negotiation. While all banks are required to inform you about their cheaper accounts, they’re obviously going to try and upsell the more expensive ones to see how much profit they can make from your business.
In the end, the type of banking you wish to do depends on your own financial situation, and what you consider to be cheap or convenient. While some people don’t wish to pay anything for their banking needs and have no issue doing their business completely online, others prefer to visit their local branch and deal with things in person. Either way, if you’re about to open a new account or are thinking about switching to a cheaper one, sit down and talk with a bank representative to discover all their other options. If you’re unhappy with their services, make that clear, even mention that you’re thinking of closing your account and signing up with one of their competitors. Who knows? Not only can they switch you to one of their cheaper accounts, they may even waive certain fees or throw in some additional perks. Either way, it doesn’t always make sense for everyone to pay the most for their banking needs. When the banks raise their fees, some clients find it acceptable and some don’t. If you’re one of the clients that’s actively trying to save money wherever possible, do your research and shop around for an account that meets all your needs.
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