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:
- High End Chequing Account Comparison
- Unlimited Chequing Accounts in Canada
- High Interest Savings Account Comparison
- Comparing US Dollar Bank Accounts
- Canadian Bank Accounts for Kids
- Small Business Banking Account Comparison
- High Interest Tax Free Savings Accounts (TFSA)
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?