Bank Fees and Charges in Canada | How to avoid them

Let’s be real, bank fees and charges in Canada are brutal. Not only do you need to pay financial institutions to hold your money, but they’ll charge you for any additional service you need. It’s a bit ridiculous, so it’s no surprise why many people have switched to a high interest savings account with an online bank instead.

That said, abandoning a traditional chequing account outright likely won’t happen for most Canadians. That doesn’t mean you need to suck it up and pay every Canadian bank fee thrown at you. Instead, you need to know what the charges will cost you and how to avoid bank fees in Canada.

What are bank fees?

Let’s start with the basics. Bank fees and charges are anything that you need to pay for at the bank. Just about every service has a charge, but if you have a specific bank account with a financial institution, then you’ll usually pay a monthly fee for a bundle of services. The problem is, you usually get a limited number of transactions, and not everything is free. In other words, you could still end up spending a lot. Here are the most common bank fees and charges in Canada to be aware of:

  • Monthly fee – When it comes to bank fees and charges in Canada, the monthly fee is the most common. As the name implies, this is the monthly fee you’ll pay to hold an account. How much you’ll pay depends on the type of account you have.
  • Transaction fees – Every time you make a withdrawal from your account, it counts as a transaction. Once you exceed the number of monthly allowed transactions, you’ll be charged a fee of $1-1.50 for each additional one.
  • INTERAC e-Transfers – In most cases, INTERAC e-Transfers count as a standard transaction. However, some financial institutions may count them separately and charge you $1-2 for each one.
  • ATM Withdrawal – Using ATMs within your financial institution’s network counts as a withdrawal and there’s no fee if you’re within your limit. However, if you use an ATM from another network, you’ll be charged a fee of $1.50-3 each time.
  • Paper statement fees – Getting your monthly statements delivered to your home are no longer free. Instead, they’ll cost you $2-5 every month. That said, e-statements are free.
  • Non-sufficient Funds (NSF) Fee – NSF Fees happen when you try to charge an amount that exceeds what you have in your bank account. For example, you try to charge $100 to your debit card when there’s only $60 in your account. This can cost you $40-50
  • Overdraft protection – Although this is one of the bank fees and charges that are optional, it’ll protect you from paying NSF fees. Overdraft protection usually costs $5 a month or $5 per use.

The above are the most common Canadian bank fees, but there are a few additional fees to be aware of. If you need physical cheques, bank drafts, a safety deposit box, and currency exchange services, you’ll have to pay for all of them.

How to avoid bank fees in Canada

Interestingly enough, there are actually quite a few ways to avoid bank fees in Canada. In some cases, you can eliminate them entirely, and at other times, you can greatly reduce how much you’re paying. 

Maintain a minimum balance

Some financial institutions will waive your monthly fees completely if you maintain a minimum balance. How much you need to keep in the account depends on the type of account you have. Generally speaking, the higher-tier account you have, the more you’ll need to keep in your account. For example, if you maintain a minimum monthly balance of $5,000 in your TD All-Inclusive Banking Plan, your monthly fee of $29.95 will be waived.

Admittedly, some people will not like the idea of keeping that much money in their accounts just to waive the fee, but you need to think of the big picture. The benefits you get with a premium account, such as free cheques, premium credit cards, and bank drafts are typically worth much more than the monthly fee. Plus, if you treat the minimum balance as your emergency fund, you’ll always have funds available. 

Bundle your services

Some financial institutions will give you a rebate on your monthly fees if you have multiple services or products set up with them. For example, with RBC, you save up to $11.95 per month if you have an RBC bank account + 3 or more product categories. In addition, you may be required to set up a pre-authorized payment, direct deposit, and eligible bill payment.

While not having to maintain a minimum balance to get a product rebate can be attractive, there’s often a lot of work required. Financial institutions want you to set up as many services with them as possible since it’ll be difficult for you to make a switch later.

Use an online bank

Recognizing that Canadian bank fees can be incredibly high, many online banks now offer some of the best high interest savings accounts in Canada. Generally speaking, these types of accounts have no monthly fees, no minimum balance requirement, unlimited transactions, and free e-transfers. How is this possible you ask? Since online banks have no physical stores, their overhead costs are significantly lower than traditional banks. That money saved is passed onto consumers in the form of no or low fees.

There is a trade-off though since online banks have no physical locations, it could take longer for certain services. For example, if you needed a cheque, bank draft, or immediate access to your money, it might take longer. 

Choose your account wisely

Most banks offer student and senior accounts where there is no (or a low) monthly fee. If you qualify for one of those accounts, you should get one right away. Alternatively, every bank has multiple chequing accounts available. The ones with fewer transactions and benefits will typically have a lower monthly fee compared to premium accounts. Choose the account that best meets your monthly banking needs. You want to avoid paying for a higher-tier account when you won’t max out the perks.

Monitor your transactions

Besides the monthly fees, transaction fees are where things can add up quickly. Every time you withdraw money from your account, it’s considered a transaction. This includes debit card transactions and transfers to other accounts. Monitor how many transactions you’re making to ensure you’re not exceeding your limit. If you constantly find yourself paying extra transaction fees each month, you may want to upgrade to an account that gives you more transactions.

The lowest bank fees in Canada

Trying to determine the lowest bank fees in Canada is a bit of a fool’s game. Every bank will charge similar fees. They’ll all also offer similar fees for their various bank accounts. If you’re looking to avoid bank fees and charges in Canada, you need to sign up for a digital bank. Some of the most popular options include:

EQ Bank

  • 2.5%* Interest rate
  • No everyday banking fees
  • Unlimited day-to-day transactions
  • No minimum balance required
  • Unlimited free Interac e-transfers®
  • Free electronic fund transfers
  • CDIC Member

Anyone looking to learn how to avoid bank fees in Canada will likely quickly come across EQ Bank. Over the years, they’ve become an incredibly popular online bank since they consistently offer one of the highest interest rates. They might not have the highest rate at any given time, but they don’t bother with teaser rates so you’re always earning the same amount of interest. 

Simplii Financial

  • 5.25% Promotional interest rate
  • $50 weclome bonus
  • No everyday banking fees
  • Unlimited day-to-day transactions
  • No minimum balance required
  • CDIC Member

Another way to avoid Canadian Bank fees is to sign up for Simplii Financial. This bank is owned by CIBC, so you get access to their ATM network if you open a chequing account with them. That said, their savings account is more popular as they often offer an increased interest rate when you sign up. That said, their regular interest rate is typically much lower than EQ Bank.

Although I’ve focused on digital banks here, it’s worth noting that I still use a traditional bank. I personally have a safety deposit box and require a bank draft a few times a year. Many of my investments are also with the same bank, so it’s easier to have a regular chequing account with them when I need to move money around. Of course, I keep the minimum balance required so I can avoid bank fees and charges in Canada.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi

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