Weekend Reading: A Money Grab Edition

Canada’s big banks rollout new fee increases every year or two. These fee hikes may seem innocuous at first – 50 cents here and $1 there – but they collectively (and annoyingly) add up to big bucks over time.  My advice for Canadians who want to remain with a big bank but don’t want to pay excessive fees is to downgrade to a basic chequing account, maintain a minimum balance, and use a cashback or travel rewards credit card for everyday spending instead of using debit (which can incur more fees). But that’s becoming more and more difficult as banks continue to hike monthly fees. Increase the minimum balance requirement, tie the account fee reduction to holding multiple (fee-based) products, and in some cases not even offer the option to waive the fee with a minimum balance.

Inclusive Plans

For example, TD’s all-inclusive plan costs $29.95 per month and requires a minimum monthly balance of $5,000 to waive that fee. Their Everyday chequing account costs $10.95 per month and includes 25 transactions. The fee is waived when you maintain a $3,000 minimum balance.

Canada’s largest banks (and others) have all signed a public commitment to offer low-cost and no-cost accounts. Youth, students, seniors, and RDSP beneficiaries may be eligible for a no-cost account that includes basic features.

Canada’s Big Bank Accounts

Bank / Account Name	Monthly Fee	Maximum number of monthly debit transactions	Minimum monthly balance (for monthly fees to be waived)
BMO / Practical Plan	$4.00	12 (in-branch and self-serve transactions)	—
CIBC / Everyday Chequing Account	$3.90	12 (in-branch and self-serve transactions)	—
HSBC / Performance Chequing – Limited	$4.00	14 (in-branch and self-serve transactions)	—
National Bank / The Minimalist Chequing Account	$3.95	12 (includes 2 in-branch transactions)	—
RBC / Day to Day Banking	$4.00	12 (includes in-branch and self-serve transactions)	—
Scotiabank / Basic Banking Account	$3.95	12 (includes 4 in-branch transactions)	—
TD Canada Trust / Minimum Account	$3.95	12 (includes 2 in-branch transactions)	$2,000

Consumer advocates will call these fee hikes a money grab (as I did in this Global News column) and they’re right. Big banks get away with increasing fees because. They know that most Canadians will begrudgingly accept them. Chequing accounts are ‘sticky’ products and customers simply don’t want to go through the hassle of switching banks or don’t know that free options exist outside the big bank environment.

Consumer Recognition

I recognize that it’s not practical for some people to hold a basic account with a low number of transactions, or to keep thousands of dollars tied up in a chequing account just to waive monthly fees. In that case, I think you can make one last-ditch effort to negotiate your monthly fee down to an acceptable level (as I’ve done) before you need to seriously consider moving to a no-fee bank account.

For no-fee banking options that come with a debit card, I’d look at Tangerine, Simplii, Motive, or a local credit union. You’ll get access to a limited number of ATMs (Scotia, CIBC, or the Exchange network of ATMs) and can typically get unlimited free transactions, including bill payments and e-Transfers.

The one downside to moving away from a big bank environment is the lack of branch access. For example, if you need a bank draft to make an offer on a house. You may not be able to get one for 48 hours or more if you deal primarily with an online bank.

Canada’s big banks continue their relentless assault on our wallets by nickel-and-diming us to death with fee increases. It doesn’t have. to be this way. In the age of FinTech, there is a better and cheaper option available outside the big banks in every line of business in which they operate. It’s time to explore those options if you haven’t already.