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How to Avoid or Reduce Bank Fees

After Kathryn’s post about financial pet peeves, I’ve gotten a lot of feedback and emails regarding bank fees. If you’re the type to read financial blogs, then chances are, you may get as annoyed by bank fees as I do.

Added fees are a huge source of income for the banks. You give them your hard earned money, they turn around and lend it out at a higher interest rate than they pay you, then charge you a fee on top of it. A brilliant business model if you ask me.

However, there are a few ways to avoid bank fees.  As some of the points below may be obvious to some of you, they may trigger some new ideas on how to eliminate or reduce bank fees and save a few dollars.

Use a Free Bank

There are not many banks that will offer their chequing account services (with cheques) for free without any minimum balance, however, they are out there.  From my experience, the bank that comes to mind that offers essential chequing account services for free is PC Financial.  They offer unlimited transactions and cheques for free with no minimum balance.  The disadvantage is that PC Financial does not have any bank branches, so no tellers to help you face to face.  This may not be a disadvantage to some, but if you need a bank draft (like for a down payment on a house), you’d have to phone them first to have a draft ready a day later at a CIBC branch.  They have bank machines for deposits/withdrawals at various Loblaws grocery stores along with free access to CIBC ATMs.

Keep a Minimum Balance

If you are set on having an account with a “bricks and mortar” bank most, if not all, of the big banks offer chequing accounts for free providing that you keep a minimum balance.  Although some may think that keeping a minimum balance is a waste of capital allocation, it really depends on the fees.  For example, if the TD Select Service Account seems to add value to your banking habits, you’re looking at a $25/month fee unless you keep a minimum balance of $5,000.  Although $5k seems like a large amount of money to have sitting around, on an annual basis it represents a 6% return by having the monthly fee waived.

Note though that with some bank accounts, obtaining a book of cheques will have a fee even if you keep a minimum balance so make sure to read the fine print.  I have a bank account with CIBC which charges for cheques.  To get around this, I use my line of credit cheques which are free.  This works for me as both accounts are connected online and I can transfer money back and forth instantly.  With a little research, I’m sure most banks have little savings tricks.

Do Your Research Up Front

There is no one bank that is best for everyone as banking needs vary widely depending on the person.  Some require more Interac transactions, others cheques while some require currency exchange options.  The best bet to reduce fees is to figure out what exactly your needs are and do your own due diligence.

To give you a head start, here are some articles from the past on banking comparisons that may help:

Use One Bank

Generally speaking, the more business you do with one bank, the more you can save in fees.  For example, Royal Bank provides a multi-product discount.  As well, the more you use one particular account for your deposits, the easier it is to keep the minimum balance to avoid the fees.

What are your thoughts?  How do you get free banking?

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FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 33 comments… add one }
  • Ray @ Financial Highway December 14, 2009, 9:55 am

    I used keep more than the minimum on my account with TD and they would waive the fees, but since married my wife works for a bank so we get them free :)

  • DG December 14, 2009, 10:11 am

    Our local credit union refunds fees if you have a balance or debt greater than $30k… our mortgage will keep that covered for years to come.

    Dan.

  • Ben December 14, 2009, 10:47 am

    PC Financial for my wife and me. It’s a good deal, and I’ve always had good service to boot.

  • saveING.ca This is why I signed up with ING Direct December 14, 2009, 10:49 am

    I too work for a bank (National) so the fees are waived.

    Note students are able to get the TD Value account for free.

    cheers,
    MG

  • mcmatterson December 14, 2009, 11:09 am

    We use a credit card for nearly all transactions. That way we can get the bare minimum banking plan with low fees or low minimum monthly balance. Plus 1% – 3% cash back.

    Naturally, this is not a good idea if you don’t pay off the balance each month.

  • Kat December 14, 2009, 12:25 pm

    Do anyone know of a ‘free bank’ in Quebec? PC Financial is not available.

  • saveING.ca This is why I signed up with ING Direct December 14, 2009, 1:19 pm

    Kat: not that I know of unfortunately! I would like this too!

    mcmatterson: I do the same, especially for the cash back.

    By the way, there’s a war brewing between retailers and credit card companies. On one hand, card cos’ give out outrageous cashbacks, but they also charge really expensive fees to retailers (think 2.5% to 5 % ! ).

    And retailers, well, they can just decide not to accept Visa/Mastercard, unfortunately thereby lowering their top-line.

    cheers,
    MG

  • Steve Zussino December 14, 2009, 1:23 pm

    My wife and I love to use PC Financial. Great service and fees are so low.

  • soultrance December 14, 2009, 1:26 pm

    Can you recommend any free solutions available in Quebec? I’m in Montreal and want to go with PC but they don’t have any physical locations out here and there is no way for me to sign-up for an account.

  • nobleea December 14, 2009, 1:35 pm

    I have heard of people negotiating free banking fees as part of their mortgage renewal. Only works if you get your mortgage same place as your main banking.

  • Krista December 14, 2009, 2:17 pm

    The other thing is to make sure you don’t have more account than you need. I often help friends set up their budgets and I’m always amazed that they get the unlimited account when they only make 10-15 transactions.

    Another thing to consider – overdraft. It can cost you anywhere from $1.50 to $5 per month just to carry overdraft protection – regardless of your balance. A fee of (usually) $5 is levied every time you go into overdraft, even if it’s only by a couple of dollars, and then they charge daily interest on top of that. Don’t do it. It can be one of the most expensive forms of debt out there.

  • Big Cajun Man December 14, 2009, 2:39 pm

    Be a good customer, track the mistakes your bank makes, and then go in and demand free banking. If you are a good customer they should wave your feeds for a period of time (especially if they are offering that to NEW customers).

    If you are negotiating a Mortgage, absolutely fight for fee reductions as part of your discussions with the bank. I have heard of one chap who got 5 years of free banking, because he locked in his Mortgage for 5 years!

    Do not be a sheep, be a Wolf!

  • Michael_S December 14, 2009, 2:50 pm

    I plan on doing exactly this starting next month. We have our accounts with Scotia, a basic account ($7 / month) and a “high interest” savings account currently paying 0.15% interest (whoopee). We finally have enough in the savings account that I’ll be transferring it to the basic account in order to maintain the $2500 min required to waive the $7/mo fee. Works out to over 3% return.

  • Finance Matters December 14, 2009, 3:07 pm

    I use the TD account and keep >5k balance.

  • mp December 14, 2009, 6:33 pm

    I have a TD Infinity account that waives the $12.95 monthly fee if the balance is over $3,000. So the $3,000 is my float. I never go below it, never pay fees. Haven’t paid a bank fee in the two years since I became debt free.

  • Laptop Briefcases December 14, 2009, 6:34 pm

    In the past I wasted far too much money on bank fees. I assumed that the banks would simply charge whatever they wanted and I had no choice in the matter. I thought other banks would simply charge similar fees. Last time I went to talk to a bank representative I was quite surprised when they offered me a chequing account with basic fees waived. I think I should keep pestering them to see what else they will give me.

  • Stuart December 14, 2009, 9:21 pm

    I go into my bank every 6 months or so to renegotiate the rates on my lines of credit, etc. Has anyone gone in lately? I am currently paying prime +1.5 on an unsecure line of credit and would like to get it below 1%. I have $0 debt, but have my line of credit on stand-by just in case I don’t have enough idle cash for my TFSA in January.

  • Morgan December 14, 2009, 10:47 pm

    I’m just getting started in financial planning, and I almost fell out of my chair when I saw our monthly fees at Scotia. I won’t say what it is, but let’s just say I could have a lot of goodies free from TD with the amount we spent – and still be farther ahead than with Scotia. I’m heading into RBC tomorrow to see if they’ll waive the fees. If not, it’s off to PC Financial.

  • The Financial Blogger December 14, 2009, 10:53 pm

    I work for one! hehehe!

    seriously, I would still get free banking by using my HELOC as my checking account (I can split them into multiple accounts).

  • cannon_fodder December 14, 2009, 11:56 pm

    I would encourage everyone to vote with your dollar. If your bank doesn’t want your business (i.e. they treat you as a supplier of money rather than a valued customer) take your business to a financial institution that is willing to demonstrate their desire for you to join them.

    Higher value customers (e.g. high balance mortgages, greater than Prime loans, credit cards, investments) will get preferential treatment. Use that to your advantage and deal with branch managers face to face. Establish a working relationship.

    I can’t tell you how well that has worked for me – and I do 99% of my banking at the ATM or online!

  • Danny December 15, 2009, 2:43 pm

    I have the All-in-One (AIO) with National Bank. While the account itself is free regardless, as an engineer, I get 200 free cheques per year for my AIO AND and an additional free chequing account (which I can’t even find a use for). I also get my open AIO at prime, which is 0.85% off what it would be otherwise. As it is a LOC, all my money is offset against my principal, so I get a return on my balance all month while I use my credit card for every single purchase I can (which means I also get a return via points).

    If you pay off you credit card balance every month, it’s impossible to find a better chequing account IMO – it pays you!

    If you belong to a professional organization (engineer, nurse, doctor etc), I would strongly recommend checking out NBC.

    Frugal: You’re very right to point out the pitfalls of PC Financial. Buying our house was made extremely stressful because of how excruciatingly long it took to get our money out of our account. That said, it’s free, so I blame myself for not thinking further ahead.

  • DannyCanuck December 15, 2009, 2:44 pm

    I have the All-in-One (AIO) with National Bank. While the account itself is free regardless, as an engineer, I get 200 free cheques per year for my AIO AND an additional free chequing account (which I can’t even find a use for). I also get my open AIO at prime, which is 0.85% off what it would be otherwise. As it is a LOC, all my money is offset against my principal, so I get a return on my balance all month while I use my credit card for every single purchase I can (which means I also get a return via points).

    If you pay off you credit card balance every month, it’s impossible to find a better chequing account IMO – it pays you!

    If you belong to a professional organization (engineer, nurse, doctor etc), I would strongly recommend checking out NBC.

    Frugal: You’re very right to point out the pitfalls of PC Financial. Buying our house was made extremely stressful because of how excruciatingly long it took to get our money out of our account. That said, it’s free, so I blame myself for not thinking further ahead.

  • Ms Save Money December 15, 2009, 2:46 pm

    @ cannon_fodder – definitely agree with you on that – some banks treat you like you’re nothing yet you’re providing them business.

    That’s why I bank at a credit union. I used to bank with Washington Mutual and they charged so petty overdraft fees even if it was $1.00. I wasn’t very pleased with them and I started banking with Schools First Credit Union & I haven’t had one overdraft fee for 7 years now. :)

  • Greg December 15, 2009, 4:51 pm

    Like @Danny, I also have the National Bank All In One (AIO) account. Mortgage at prime and all extra money in the account offset against the mortgage principle, effectively giving all my money interest at prime.

    I have to pay to buy cheque books, but I only write about 10 cheques per year, so not a big deal.

  • Kate December 15, 2009, 6:55 pm

    Bank fees have gotten me in trouble more than once. A great suggestion to research before signing up for an account. Luckily my chequing account is free and I try to do most of my bill paying online so I can avoid going over the maximum number of free cheques you can write in a month.

  • Canadian Freedom December 16, 2009, 6:16 pm

    One of the easiest ways is to open a line of credit for everyday use and use it like a bank account. Your “overdraft” is cheaper (bank overdraft rates are killer) and there is nothing to say you cannot keep a positive balance in your account. Bank fees normally will eat up the pitiful interest you are giving up.

    Another option is to negotiate with your branch as they do have the power to override bank fees.

  • Canadian Freedom December 16, 2009, 6:20 pm

    The easiest way to avoid bank fees is to open a line of credit and use it like a bank account. There is nothing that says you cannot keep a positive balance, and the interest you give up is more than offset by bank fees. Another bonus: your “overdraft” rate just got a lot better since overdraft interest rates are generally high.

    If you don’t want to take this option negotiate with your branch. They do have the power to waive fees.

  • Father of Five December 16, 2009, 6:29 pm

    I have a CIBC “Waive” Chequing Account, which waives all fees at month end if I maintain a balance of $1500. Based on my reading of this blog, looks like CIBC forgot about me because they never change my required balance limit. And I am not about to tell them. Each month I see them waiving about $40 in bank charges.

  • Hilary December 19, 2009, 1:09 pm

    TDCanadaTrust offers to waive fees on some accounts when a senior citizen is one of the signatories on the account.

    Sometime ago I went overseas for a short while and my parents offered to help me administer my mail and bills back in Canada. When we visited the bank to add my parent’s names to my chequing account the bank offered to cancel the fees. Since my parents and I all have excellent credit ratings this was a risk free way to eliminate fees.

  • Link Wheels December 26, 2009, 1:41 am

    Thanks for the info, I really do pay too many bank fees. I am in Australia and currently use Westpac. When I find time I will switch over to the Bendigo Bank. Anyone here from Australia that could offer any advice?

  • Disgruntled May 6, 2010, 3:24 pm

    F… err. Screw PC financial, their “No Fee” account is full of hidden fees, such as $40 NSF, Overdraft fees, Certified Check fees. If you dont write checks, then maybe they are OK, but if you write even a few checks a month, forget them! I even called to plead my case (the check was written to one of their own accounts, so they took $40 on both sides!)

    I’m currently checking out ING Direct, I believe they have no NSF fees, that will save me at least $40 a year.

  • FT FrugalTrader May 6, 2010, 3:36 pm

    Disgruntled, all banks will have fees for NSF unless you have overdraft protection. By the sounds of it, overdraft will save you a good few bucks every year.

  • timjim December 18, 2010, 12:49 pm

    Disgruntled

    if NSF fees and overdraft fees are your issue then the problem is you not the banks.

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