When the COVID-19 pandemic hit Canada, Canada’s big six banks were quick to allow mortgage payment deferrals and other relief measures for customers struggling financially. But a little more than a year later, some big-bank customers have been getting letters in the mail announcing a range of fee hikes on their chequing accounts.
TD, for example, has increased the transaction fee on its TD Canada Trust Preferred Chequing account from $1.25 to $1.95 and raising the minimum monthly balance for waiving those free from $2,000 to $5,000. CIBC is upping monthly account fees on its CIBC Smart Account, CIBC Everyday Chequing Account and CIBC EverydayPlus Account starting July 1.
BMO, meanwhile, has raised the monthly account fees on a number of its everyday banking products effective May 1. And Scotiabank announced fee increases on several of its bank accounts as of March 1.
“It’s definitely a money grab,” says Robb Engen, a fee-only financial planner who has chronicled his own efforts to minimize banking fees in his popular personal finance blog Boomer and Echo.
Canadians have been notified of the planned increases even as the economy has yet to fully recover from the financial impact of COVID-19, with the third wave of the pandemic reversing employment gains in the parts of the country. And the fee hikes come despite all six of the big banks recently posting profits that topped analysts’ expectations.
Many of the fee increases were for legacy accounts that the banks no longer offer to new customers, says Mikael Castaldo, general manager of everyday banking at financial products comparison site Ratehub.ca.
“We saw banks increase their fees to bring them in line with the fees of products that are in market today,” Castaldo says.
TD, for example, told Global News it hasn’t offered its Preferred Chequing Account to customers since 2001. “Most existing account holders have moved to other accounts,” the bank said, adding that, “the majority of remaining Preferred Chequing Account holders are not impacted by the change in the minimum monthly balance, which is a way for them to avoid paying account fees.”
“When pricing changes are made, we look to provide our customers with ways to avoid or minimize the impact of these changes by selecting other options that may better meet their needs,” the bank also said, adding, “we also encourage any customer experiencing financial hardship as a result of the pandemic to contact us directly about ways we can help.”
CIBC, Scotiabank and BMO also said customers have a variety of options to avoid or minimize fees are encouraged to get in touch to discuss their needs.
National Bank said via email it is also increasing fees on some accounts, although it is also eliminating flat monthly fees on most banking packages for young people aged 18 to 24.
RBC told Global News that in light of “the financial challenges many Canadians are facing during this pandemic,” it has chosen “not to increase any fees on retail bank accounts” and has “no plans to make any increases in 2021.”
Still, Canadians who are facing chequing account fee increases have options, both Engen and Castaldo say.
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Just because your bank wants to charge you more — or require higher minimum balances to waive the fees — doesn’t mean you have to pay more or leave more of your money sitting in a bank account that earns no interest, Engen says.
One option is to contact your bank and ask for a better deal.
“If you’ve been a loyal customer for a long period of time, ask about a loyalty discount,” Engen says.
Chequing accounts are what he calls “sticky products.” Many Canadians tend to do much of their banking business at the financial institution where they have their chequing account, he says.
“Banks want you to be a chequing account customer because that leads to other cross-selling and different products,” he says.
That’s something to keep in mind as you negotiate. Engen says he was offered a no-fee account at one of the big banks, where he’s been a lifelong customer, when he threatened to take his business elsewhere after a fee increase a few years ago.
That said, the other option is to actually break up with your bank. If you’re looking for a chequing account that comes with no fees, you’ll find plenty to choose from, Castaldo says.
There are a lot of “challenger banks” offering bank accounts with features like unlimited transactions and free e-transfers that do not require a minimum balance and charge no monthly fee, he adds.
Many of them are online banks. Among the names mentioned by Engen and Castaldo are Tangerine, Simplii Financial, EQ Bank and Motive Financial.
You can research and compare chequing accounts available in your province on sites like Ratehub or Rates.ca. The Financial Consumer Agency of Canada (FCAC) also has a handy online Account Comparison Tool that includes the option to search for accounts that charge no monthly fees.
Still, it’s important to read the fine print and make sure any no-fee accounts you’re considering have all the functionalities you need, Castaldo says.
For example, not all online-only accounts come with a debit card, Engen notes. Another potential pitfall is having to wait a few business days for a money order or bank draft, a delay that could be “critical” if you need to make an offer on a house, he adds.
That said, Tangerine, which is owned by Scotiabank, and Simplii Financial, owned by CIBC, offer many of the advantages of traditional banking, including access to, respectively, the Scotiabank and CIBC ATM networks, Castaldo notes.
And while changing your chequing account may seem like a hassle, saving on fees can be well worth the effort, Engen says.
A 2018 survey by Ratehub suggests the average millennial has so far shelled out $760 in banking fees over her or his lifetime. For Gen. Xers, that figure is $2,800 and for boomers $2,200.
And leaving money sitting in your chequing account just to clear the minimum balance that will spare you those fees is also costing you money when those funds could be put to better use, Castaldo says.
“That extra $3,000 could have been accruing interest in a savings account or in some sort of investment.”
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