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Low-Cost Alternatives Amidst Fee Hike-Ups by Major Banks

April 29, 2015 By Samantha 5 Comments

Canadian Banks Hiking Fees for Account Holders

Major Canadian banks plan to increase their fees or have already hiked up their ATM, debit, and purchase fees and charges on other transactions to make up for profit losses due to falling interest rates. Because of profit squeezes, banks increase their rates on services such as check certifications, credit card payments, and fees on savings accounts. Charges add up while the cost of living constantly rises, from higher bank fees and insurance premiums to rising property taxes and commodity and food prices. Given the fact that Canadian household debt has already hit new high, fee hikes are a source of concern for many, especially borrowers with excessive debt load.

Fees and Accounts Affected

Banks review their services and products annually, including fees, terms, surcharges, and earn rates. The explanation they offer is that they are forced to adjust the pricing to stay in business and keep ahead of the competition. Banks also point to the fact that account fees are adjusted to reflect market conditions. At the same time, this is a sensitive topic for many Canadians, and some are already looking for alternatives to save on fees and charges. The good news is that while banks hike up their fees, pricing adjustments are negligible for some services. For example, the current fee for items deposited at RBC is $0.20 per item while the new fee is $0.22. This is not the case with other services and accounts. The current dishonored payment fee is $40 and the new fee – $45. RBC plans to tweak rates across an array of services and accounts as of June 1, including mortgage payments, debit purchases, and other transactions.

Toronto-Dominion already introduced new fees on business transactions, higher savings accounts’ transfer fees, and higher minimum balances. The new fees apply as of April 1. The Bank of Montreal also plans to adjust the pricing as of May 1 to increase debit transaction fees, bank plan fees, and charges on paper statements. The Bank of Nova Scotia also hiked up fees and charges across transactions and accounts. A report compiled for the Canadian Financial Consumer Agency concludes that fee increases on some accounts are moderate while others are more significant. Last year alone, variable fees and associated payments have increased substantially, with reported increases of up to 46 percent. The fees on checking accounts, on the other hand, increased by close to 14 percent.LOC38

Alternatives to Bank Accounts and Services

While major banks are in the process of updating and adjusting their charges and fees, there are other alternatives to consider, among which finance companies, credit unions, bank subsidiaries, and others. Credit unions, for example, offer affordable fees and rates to union members. Some unions assess no fees on ATM withdrawals and debit card purchases. Fees and charges vary from one establishment to another, however.

Meridian

While Meridian assesses monthly fees, their checking account goes with multiple features and perks and allows users to make ATM withdrawals and deposits, in-store purchases, and bill payments. There is an option to deposit paychecks as well. Meridian’s exchange network allows consumers to make transactions, and they benefit from optional overdraft protection. Telephone, in-branch, mobile, and online banking is also offered to access cash. Automatic transfers to and from accounts are free. Self-service transactions cost $9 a month while official and AMEX travelers checks cost $12 a month. Meridian offers a rebate for up to 4 interac fees for those who maintain a balance of at least $1,000.

Vancity

Vancity features basic accounts with no maintenance fees. If you are a union member, you also benefit from lower credit card rates and fees. The average interest rate on credit cards is around 15.20 percent while banks charge 18.8 percent on average. The average rate on balance transfers is about 14.5 percent for credit unions and 20.1 percent for banks. The e-package checking account is a flexible and convenient option for unlimited debit card transactions. Everyday transactions are free of charge, including debit purchases, transfers, and ATM withdrawals. In-person transactions include account transfers, bill payments, and account withdrawals. They cost $0.70 each, and there is no monthly fee provided that customers maintain a balance of at least $1,000. The monthly fee is $7 for balances lower than $1,000. Check and preauthorized payments are offered at no added cost.

Desjardins

Desjardins features free line-of-credit repayments, summary of transactions, passbook updates, deposits, and more. There are fees for other transactions through regular savings, build-up savings, and checking accounts. Payments of bills, transfers, and deposits cost $1 each. Checks, direct withdrawals, and direct payments in the U.S. and Canada cost $1. Fees apply for teller services as well – $2.25 per bill payment and $1.25 per transfer, withdrawal, or cashing.

More Options to Avoid High Rates and Fees

LOC37Tangerine

Tangerine is a good example. The bank offers a no fee checking account and free withdrawals through Scotiabank’s ATM network. In addition, customers benefit from free online statements, ATM deposits, email money transfers, and online daily banking. Debit purchases and bill payments are also offered at no added cost. The same goes for the first checkbook and Interac e-transfers. One free card replacement and stop payment are allowed. Additional checkbooks cost $12.50, and Interac e-transfers – $1. A late fee of $2.50 applies after thirty days. The current earn rate is 0.25 percent for balances up to $49,999.99 and 1 percent for balances of $100,000 and higher. Customers are paid interest on a monthly basis. Added benefits include mobile-banking for tablets and smartphones, bank drafts, 30-day protection, email alerts for deposits and payments, and more.

PC Financial

PC Financial also advertises a no fee account and offers the option to earn bonus points. They can be used toward free groceries and other purchases. The main benefit for customers of PC Financial is that they are offered no fee daily banking as well as unlimited free checks, free transactions, and no monthly fees. Transactions are free at CIBC bank machines and PC Financial, and account holders save up to $200 annually. Customers are also offered a high interest savings account with no monthly fees, no minimum balance requirements, and an attractive earn rate. Some fees apply to certain banking services. Customized account confirmation letters, for example, cost $16.50 each. Other fees include:

• $20 per inter-branch payments
• $10 per wire transfers from other banks
• $7.50 per bank draft and money order
• $50.00 per GIC, TFSA, and RRSP transfers to other establishments

Downsides and Issues to Keep in Mind

LOC39

While some banks and other financial establishments offer safe and convenient solutions with low or no monthly fees, geographic availability is one of the major problems. Some banks have a few branches across Canada while others operate locally. This means that most transactions, including transfers, bill payments, and others, are online transactions. Product availability is another issue. Major banks such as RBC and TD offer a wider range of products and services compared to credit unions and small banks and have many branches across Canada.

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