Could banking soon be more affordable? What Freeland's announcement means for Canadians

Federal Finance Minister, Chrystia Freeland, made headlines recently for promising new action to make banking more affordable for Canadians fed up with high fees. The announcement is most welcome, but will it actually lead to reduced banking fees? Let’s take a closer look at what the government is offering, and whether it’s likely to make a difference.

Lower banking fees may be on the way

In response to the growing concern over banking affordability, the federal government is taking steps to alleviate some of the financial pressures Canadians face. The initiative kicked off with Freeland asking the Financial Consumer Agency of Canada (FCAC) to spearhead the availability of more no-fee and low-cost bank accounts. 

Freeland also asked Finance Canada to investigate ways to reduce various bank fees, including those frustrating – and expensive – charges that occur when a payment is returned for nonsufficient funds (NSF). 

Additionally, making good on a promise from the spring budget, the finance minister has designated a single provider for consumer complaints. The Ombudsman for Banking Services and Investments (OBSI) has been around since 1996, but three of the big five banks have since opted to use a privately-owned alternative. With the change, all Canadian banks will be required to use OBSI, effective November 2024.

What does this mean for Canadians?

The government has tried, and failed, to rein in bank fees in the past. In 2015 the Conservative government backed an NDP motion to end fees for paper bills and other “pay-to-pay” charges. It’s unclear what happened next, but most banks still charge around $2.00 for paper statements today.

As much as Freeland appears to be taking action, it remains to be seen whether any positive change will come. 

The agency she asked to improve availability of no-fee and low-cost bank accounts, FCAC, has some teeth but may not be able to directly lower banking fees. It has successfully required banks to provide low-cost chequing accounts for youth, students and seniors, but it will likely face major push back from the industry on this initiative.

Her directions to the Department of Finance may be similarly impotent. Any change it’s responsible for will likely require legislation which, in turn, requires political will. If any change is to come from this direction, it’s more likely to be a cap on fee increases than anything that will lower fees in the near future.

Consolidating consumer complaints within the OBSI is one change that should improve the banks’ accountability to their customers. Having a single organization investigate and resolve complaints should help ensure decisions are made consistently, and may encourage banks to improve their internal resolutions process.

Until any legislation or regulatory changes are brought forward, the Finance Minister’s announcement is little more than lip service.

How do banking fees in Canada compare with other countries?

The typical unlimited chequing account from one of Canada’s big banks costs $16.95 per month, with surcharges around $2 for out-of-network ATM withdrawals, $5 per month (plus interest) for overdrafts, and $48 for NSF penalties.

South of the border, fees aren’t that much different from our own. A typical bank account costs about $10 USD per month, and out-of-network ATM withdrawals are a bit more expensive at $2.50. Overdrafts are much more expensive, typically costing $12.50 per item plus around $5 per day the account is overdrawn. 

But across the pond, most big banks in the UK offer bank accounts with no monthly fees, no ATM fees, and no overdraft fees aside from a hefty interest rate. By this comparison, there’s lots of room for improvement.

How can I save money on bank fees?

While banking can be expensive in Canada, choosing a no-fee chequing account can help you save a lot of money. These low-cost accounts have no monthly fees and no transaction fees for regular payments including Interac e-Transfers. The only downside is that they rarely come at the expense of being able to visit a branch for in-person customer service.

One of the best no-fee chequing accounts in Canada is the Tangerine No-Fee Daily chequing account. This account includes unlimited transactions, free access to Scotiabank’s ATM network, and a Visa debit card that can be used online.

Another great free chequing option is the Simplii Financial No Fee Chequing Account. It comes with unlimited transactions, free access to CIBC ATMs, and a debit Mastercard for your online shopping needs.

Saving on bank fees isn’t limited to just chequing accounts, however. Always compare financial products online before to make sure you’re getting the best deal on the services you need.

The bottom line

Canadians have been fed up with bank fees for a long time, but the Finance Minister’s recent announcement is more sizzle than steak. Until real change begins to come about, look for no-fee chequing alternatives that make your daily transactions easier to afford.

Also read:

• How a HISA ETF can help you tap into high interest rates
• Moving your money into a higher interest savings account
• How to curb spending and tackle credit card debt