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The 2024 federal budget and bank fees

If you're getting fed up with bank fees, a new report shows you have a good reason to be upset.

A Canadian think tank, North Economics, has compared the fees charged by Canada’s Big Five banks with the fees charged by their counterparts in the United Kingdom and Australia. The report says Canadians are overpaying to the tune of “billions of dollars per year.”

Let’s take a look at the bank fees Canadians are paying and what action the federal government promised in the 2024 budget announcement to get them under control.

Bank fees explained

Banks in Canada charge a variety of fees, which the North Economics report claims add up to about $250 per Canadian each year. The company’s managing director, Alain de Bossart, says most of these fees don’t apply to banking customers in other Commonwealth countries like Australia or the U.K.

The most common fees Canadians pay to their banks include:

Monthly Fees

Many chequing accounts in Canada are subject to a monthly service fee. The amount of the fee – and the services you get in return – vary depending on the bank and package you choose. The Big Five Banks typically offer a basic chequing plan with limited transactions for about $4 per month, a plan with unlimited transactions for about $17 per month, and a premium plan with additional services and benefits for about $30 per month.

Transaction fees

If you don’t subscribe to a bank’s unlimited chequing package, you may be charged a transaction fee every time you use your account to withdraw money, make a purchase, or pay a bill. Transactions not included in your plan typically cost between $1.25 and $2.00.

Depending on the bank, some transactions may be counted separately from others. For example, some banks put a separate limit on teller-assisted transactions and Interac e-Transfers.

NSF Fees

One of the biggest so-called “junk fees” is the Non-sufficient Funds, or NSF fee. When you don’t have enough money in your bank account to cover a transaction, your bank will charge you a fee ranging from $45 to $50.

Overdraft Fees

Overdraft is an optional service that allows you to borrow money to cover temporary shortfalls in your chequing account. The typical overdraft fee is approximately $5 – some banks charge it a maximum of once per month while others charge it every time your account balance dips below $0. The money you borrow in overdraft is also subject to interest, calculated daily and paid at the end of the month.

ATM Fees

Using your own bank’s ATM is usually included in your monthly allotment of transactions, but using another bank’s machine is often subject to fees. Not only will the ATM charge a fee for the transaction, but your own bank could charge you a fee as well. Most ATMs charge between $2 and $5 per withdrawal, and banks may charge an additional $2 when you withdraw money at an out-of-network ATM.

Action on junk fees is happening south of the border

While bank customers in the UK and Australia pay less than Canadians in bank fees, Americans are subjected to much of the same nickel-and-diming we are. And regulators in that country are taking action to rein in the junk fees.

The US Consumer Financial Protection Bureau (CFPB) is a government agency that sets and enforces policy in that country’s banking industry. Its campaign against junk fees claims to have saved Americans $5.5-billion per year, primarily in overdraft and NSF fees. A recently proposed change would force overdraft fees in the US to be in line with the bank’s actual costs, closing a loophole that has allowed them to charge such high fees.

Promises made by the federal government

Among the government’s initiatives on bank fees are the following promises:

A promise to reduce NSF fees

The Federal Government announced measures to reduce junk bank fees, with a special focus on NSF fees, in its federal budget announcement, released April 16, 2024. The proposal is to cap non-sufficient funds fees charged by banks at $10, and also require banks to notify customers when they are nearing an overdraft so they can add money to their account and avoid the NSF fee. The government says they will announce draft NSF fees regulations in the next few months.

A promise of more low- and no-cost banking options

The government has also promised more low-cost and no-cost banking options, assigning the Financial Consumer Agency of Canada (FCAC) to work with the banks on making those options available.

As part of their proposal to increase the number of free and low-cost banking accounts available, the government says that FCAC is negotiating with banks to ensure that accounts that cost between $0 and $4 per month offer more free included transactions. They also propose expanding eligibility for $0 bank accounts beyond students and other select groups. 

A single body to handle complaints

The Ombudsman for Banking Services and Investments (OBSI) has been appointed as the single external complaints body for Canada’s banking sector effective November 1, 2024. Three of Canada’s Big Five banks have opted to use a private third-party company to handle complaints, prompting concerns about whether their dispute resolution process is truly impartial and in the best interests of Canadians.

While it’s likely beneficial to take away the banks’ choice in who investigates complaints, some question whether the OBSI still lacks the teeth it needs to have a meaningful impact. The organization currently isn’t a regulator and doesn’t have a mandate from the Federal Government, meaning it doesn’t have the authority to enforce its recommendations.

Where to find no-fee bank accounts

While Canada’s biggest banks all charge account fees for its chequing and savings packages (with exceptions, like for no-fee student chequing accounts), there are no-fee alternatives available at other financial institutions. These accounts offer unlimited transactions for no monthly fee, but do still charge some “junk” fees like NSF fees, overdraft fees, and additional fees for out-of-network ATMs. The best way to avoid bank fees in Canada is to shop around for accounts that charge fewer fees and have less restrictions. That way, you can keep more money in your pocket for your savings and financial goals. 

Some of the best no-fee chequing accounts in Canada include:

  • The Simplii Financial No-Fee Chequing Account
  • The Tangerine No-Fee Chequing Account
  • The EQ Bank Personal Account

Some of the best no-fee savings accounts in Canada include:

  • Simplii Financial High Interest Savings Account
  • Tangerine Savings Account
  • Neo Money savings account

The bottom line

While the Canadian government has promised action on unfair banking fees, it has yet to announce details on its plan of actionWith no details available on its plans – and a dubious track record of battling telecom industry fees – there’s little evidence that meaningful change will come soon.

Until those details emerge, the best way to save money on banking fees is to choose a no-fee bank account that includes unlimited transactions for no monthly fee. Compare chequing accounts online to find the best account for your needs, so you can keep more money in your pocket.

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