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Are You Still Paying Bank Fees?

Are You Still Paying Bank Fees?

I don’t understand why people are still paying banking fees. Bank fees, something as simple as “$7 per month for the use of this bank” are ridiculous, and you shouldn’t be paying them.

I used to pay bank fees. I had a bank account that I had set up with my parents. It cost 5 or 6 dollars every month for the use of their bank. My roommate in college was also paying bank fees – but it was more like $11 each month. This doesn’t make any sense.

The reason that banks work as they do is that they take your money and invest it, making money off the cash that you give them. They’re already making money off of you. Why would you pay the bank for the right to let them use your money to make more money?

I have now switched to a bank that doesn’t have any banking fees. Well, I should clarify, they don’t have any regular monthly fee. There is no cost to doing business with them. In addition, unlike some “free” banks, there’s also no fee for each debit transaction, and there’s no limit on how many transactions I can make.

The only time I would pay a fee to my bank is if I bounce a cheque or withdraw cash from outside of their ATM network. Seeing as it’s a credit union, I can withdraw from any other credit union without a fee, so my network is often just as large – if not large, than most of the large national banks.

Why Banks Shouldn’t Charge A Monthly Banking Fee

Banks do need to recoup their costs. Back in the day, there would be lineups out the bank on payday, getting cheques cashed, moving money around. I remember spending way too much time as a kid, inside a bank, waiting for my mom to finish their banking for the day. That’s why, like in car dealerships, they often have areas for kids to play in – because it took forever. That’s a thing of the past. I haven’t stepped foot into a bank more than half a dozen times in the last 2 years, and I don’t know anyone who has.

All my banking is done online. I can pay bills, transfer money, look up information, anything I need, from my couch. When I have gone into the bank, it’s been for things that need to be done in person – signatures for insurance, getting marriage certificates, or closing down a bank account and transferring the balance to another.

As a result, banks need to spend less money on upkeep. They need less tellers. Some banks, like Tangerine, hardly have any place you can go at all. Another option is PC Financial’s online banking, which allows you to use CIBC ATMs as well as the kiosks at Lolaws stores. The rise of online banks has also contributed to the lowering of monthly bank fees – so why are you still paying yours?

Switching Can Be Easy

To be fair, transferring your services to a different bank isn’t always the most pleasant experience. When I did it, I hardly had any issues because I hardly had any money. If you have a fairly sizeable bank account, closing it and walking out with that much cash might be a bit of a problem. You may have to set up the new bank ahead of time, and then get them to transfer it directly into that account, as that would the safest and most secure way of doing it. That process might actually cost you some money.

Other than that, however, opening a new bank account is surprisingly easy. Just bring some documents, go into the bank, and ask for a new account. Make sure it is a free account (no monthly fee) and make sure there are no extra hidden charges (per transaction fee). There are numerous banks out there that have a fully free bank account, regardless of bank account size or any other restriction. Find that one, and transfer your services there.

The hassle is worth it. A bank account is something that you’ll change on a very irregular basis, so even if it’s only a $5 monthly fee, over 5 years that will add up for $300. It might not be worth the $5 now, but it should be worth the $300 later. So check your bank, see if they charge fees, and close that account – maybe they’ll make life easy for you and reduce/remove the bank account fees to keep your business. If not, switch! There’s no reason to be paying bank fees these days.

Comments

  1. Zach @ DSO

    It might be helpful to see a list of banks that have no monthly fee. I can’t think of any off the top of my head. I personally don’t pay a monthly fee because I maintain a balance that meets the minimum requirement to avoid fees. Not everyone is able to do this.

    I also don’t step foot in a bank often. I recently switched banks so I spent some time inside the doors. During the week things were slow but on the weekends both banks were packed with people.

  2. Earth and Money

    As Zach said in his comment, by maintaining a minimum balance, you can usually get your bank fees waived. The more basic banking plans usually require a balance of around $1000-2000 in order to waive a fee around $10. This might represent less of a hassle than moving all your money from one bank to another. PC Financial and Tangerine both have no-fee chequing accounts, however neither have much in the way of bank branches. None of the big five Canadian banks have no-fee accounts unless you are of a special demographic (student, senior, child, etc.).

  3. Cherleen @ My Personal Finance Journey

    I agree. It really doesn’t make any sense to e why I should pay them for entrusting them my money. Come to think of it, while saving our money in banks, they are “our money” by lending it to other people. They are earning from “our money” so why do we still have to pay them?

  4. @FCACan

    The Financial Consumer Agency of Canada (FCAC) makes it easy to compare features for different accounts, including interest rates, fees and how you can use the account. You can compare features and find the chequing and savings accounts that best suit your needs using the interactive selector tools available at: http://www.fcac-acfc.gc.ca/eng/resources/toolCalculator/banking/index-eng.asp

  5. Frugal Guy with Balance

    I believe it is worth repeating. Banks are in business
    to make money.

    They charge fees for many services my job as a frugal guy is to ensure that I pay the banks as little as possible in fees.

    I have an account with HSBC brokerage arm.

    I pay no fees for banking services period….either in North America or any where else.

    Since they sold there investment arm I am moving my business to Questrade to receive my new ipad!

    By the way I will give the ipad to my wife for her B/D and save my self some more money. Again at no cost to me.

    Hurray for me!

    • The Passive Income Earner

      Wow! You need to transfer $250K to get the iPad free. I am ways away from that.

      • Frugal Guy with Balance

        I saw your comment a long time ago but did not want to make a comment that would be taken the wrong way.

        I saved 20% of my income for years and tried to invest it wisely making many mistakes along the way.

        But with blogs like this etc I have been able to prosper and if you do the same one day you will be demanding IPADS.

  6. passiveincome

    Bank charge you fee because they want you to have a minimum balance in your account. This lower their risk because the money in the bank is like security deposit for them. They can seize your account any time and take all your money and give it to the creditors.

    There are many no fee banking account out there, for example PC Financial, Tangerine, just to name a few. I personally prefer PC Financial because they use the ATM machine of CIBC which is all over the place.

  7. [email protected] Consolidation

    The only problem with no fee banking account might be an absence of an actual physical location i.e. branch in your area. For example, if you need a bank draft it may take up to 5 days to receive one by mail.

  8. The Passive Income Earner

    I have found that for some banks, the minimum balance requirements usually compares with keeping the money in a high saving account – the interest can offset the fees.

    To answer your questions, many have had relationahip with banks years before the no fee accounts came around. It’s important to understand the history of the no fee account to understand the journey … One thing to remember is that people don’t like change – let alone move to another bank. That would disrupt their routines.

    I recently just switch all my investments from ScotiaITrade to RBC Direct Investing. The process was quite simple. I pay more in transaction fees than Questrade but it’s not enough for me (5$ difference) to justify no getting the features I receive from RBC Direct Investing.

    The other aspect of banking is that many have their mortgage with a bank and simplicity drives home owners to have their bank account where the mortgage is. It’s natural since your pay cheque pays the mortgage. This is convenience and many favor that over the fees … It’s psychological 🙂

    I used to have fees waived and now I have to pay them but the negotiation I have with my bank (a specific individual) regarding my mortgage is way more valuable than the fees I pay. I did move my wife’s account to a no fee bank because it was simply ridiculous to pay fees for 2 accounts.

    As you can see, not everything is in a number. Once you start having many accounts and require products, it’s the entire package that you need to manage as a whole. What RBC does that I love is that if you have 3 products, the fees are all waived. I am currently negotiating with Scotia to see if she can waive my fees otherwise I can jump ship easily 🙂

  9. Frugal Guy with Balance

    I have had relationships with individuals at banks to waive fees. I moved my business to (Scotia) then after a few years people change and the new managers
    balk at previous agreements.

    Banks can be two faced and not live up to there agreements.

    Since I have moved to HSBC I have not had that issue.
    Best bank I have dealt with concerning treating me like a great customer. I know that is a novel idea to some banks.

    • The Passive Income Earner

      Funny, that happened to me as well. After the third change, I ask to get someone that was not going to transfer. I was still getting the no fee until the economic downturn hit. I suspect they needed the fees to help cover the dividends I love 🙂

      I could handle the fees since I was renegotiating my mortgage but since then it has been difficult to negotiate even when other banks have better products. With my move to RBC Investing, I have a plan to start moving away from my fee account … Especially now that mortgage brokers are mainstream and usually offer better deals.

  10. Canadianbudgetbinder

    This is a great post I have to share with my FB fans as it comes up now and again. I never paid bank fees in the UK and even though we don’t in Canada I am still shocked at what some people pay.

    I still believe you get more bang for your bank back home however paying no fees was top of our list when choosing a bank.

    The wife has been with President’s Choice for years now so I also went there.We have not had a need to see or talk to anyone personally and anything we need we get taken care of in no time at all.

    I think this type of system is great for some but not others. Some people still wish to pay to talk face to face or bank at one of the big 5 or any other that charges fees. Most people enjoy convenience of bundled services and as The Passive Income Earner states above, change, people simply don’t like change.

    Great Post.

  11. Echo

    I switched to Tangerine last summer and now I have my paycheque deposit there and make whatever bill payments I can’t make on my credit card.

    I keep my TD chequing account open since I have my mortgage and investments there. It’s the Value account, which gives you 10 free debits and the fee is waived when you keep a $1,500 balance (used to be $1,000)

    My advice to most people is to switch to a no fee online account or credit union and then use a cash back credit card for their everyday spending. Debit card fees are the worst.

  12. Nina

    Interesting, but I think a lot of people forget that the bank is a BUSINESS providing you a SERVICE. If you owned a business, would you expect to provide services to people for nothing? I suppose you think setting up ATMs and people to answer your phone banking calls and managing trades for online investing, and keeping an online banking service running, Interac, debit card systems, branch staff, among many many many other things are no cost to the bank? Come on. The bank owes you nothing except service for the fees you’re paying (and if you’re going to abuse those priviledges i.e. credit or bouncing checks then they have the right to NOT do business with you). If you don’t like what a financial institution has to offer then keep your money under your mattress and buy your house/car/EVERYTHING with cash. Good luck with that. I for one will pay my measly fees.

    • syd

      Have you seen the profits the major Canadian banks have been making? I don’t think they need your sympathy. Most of us are getting charged extra to continue to receive paper statements (for tax records, etc) that were once included in your fees, under the guise of saving the environment, despite the fact that this measure is saving the banks millions of dollars per year in printing costs, paper, and postage. Banks have many ways to profit as a business, what do they offer us? Is your money 100% secure? No, I know people who have had money fraudulently withdrawn fro their account and the onus was on them to prove it wasn’t them who withdrew it. Do they pay you high interest on you money? Of course not. Do they have branches that are open during hours that are convenient to you or do you have to bend your day to fit your banking into their cushy daytime/weekday hours? Well they are getting better at this I have to admit. The point about fees is you pay for everything- every transaction, every statement, every visit, every service….pretty soon they’ll start debiting your account for the lollipops they hand to your kids.

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