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Higher Banking Fees Are Coming From Canada's Big Five

April 29, 2015
4 mins
A man sits drinking a coffee while scrolling through his computer

Attention Canadian banking customers - you could find yourself paying higher fees to use your chequing and savings accounts. Each of the nation’s “Big Five” banks (Bank of Montreal, TD Canada Trust, Scotiabank, CIBC and Royal Bank of Canada) have hiked their banking fees, or are set to over the coming weeks.

The fee increases vary depending on the institution, but generally affect the following:

  • Monthly and annual fee increases for everyday banking products like chequing and savings accounts
  • Reductions to bank account rebates for special groups (children, students and seniors)
  • Increased fees for excessive transactions or services outside of a banking plan, such as debit transaction overages
  • Increases to minimum balances required to waive fees

CIBC, TD and Scotiabank customers have already been subjected to the changes. Bank of Montreal will implement their fee increases on May 1, followed by RBC on June 1.

The latter has incited particularly high levels of consumer disappointment; in addition to hiking fees, RBC has raised the eligible age for senior discounts to 65 from 60, and have implemented fees for those making loan payments - including mortgages.

Hidden service charges have long been a point of contention with consumers - 71% say fees are their biggest bank turnoff, according to a survey by Leger for PC Financial. After all, spotting a “performance fee” or “excess transaction” on an account history leave many consumers feel like they’re being charged, simply for saving or accessing their own money.

Why Are Banks Hiking Fees?

The big banks tend to stand together in solidarity on fees and rate pricing. They know they enjoy brand trust and strong consumer loyalty, and can charge a premium for their products because many Canadians strongly prefer their home banks to alternatives. In fact, this is known as “bank bias” - and it can cost the average consumer between $759 to $1,617, according to a Bank of Canada study.

While an RBC spokesperson has stated the price adjustments are due to the “cost of doing business”, there’s speculation that these service hikes are actually in response to today’s cheap cost of borrowing.

UPDATE: RBC has reversed some of the new fee structures announced for June 1. The bank will no longer charge customers "pay to pay" fees on their mortgage, credit card, savings and investments payments.

With variable rates priced at a recently-lowered Prime, and fixed rates hitting record lows, the big banks are certainly making smaller profits off of consumer mortgage and auto borrowing, but given the competitive nature of the spring housing market, they’re loathe to change their mortgage marketing tactics. Other hits to bank coffers could be as a result of capped merchant credit card interchange fees, shrinking revenue from declining oil prices, all while keeping investors happy with dividends. These fee hikes are all in efforts to protect bank margins from these “headwinds”.

What Can I Do If My Bank Changes My Fees?

If your lender has changed your banking plan or increased your fees, you do have options. The first step is to be an informed consumer: know what’s offered by other financial institutions, and whether you can get a better deal elsewhere. Next - ask for a better deal! Your lender may be willing to waive your fees, give you a rebate or switch you to a better product, if you have the smarts to ask.

If your bank isn’t budging on your new fee structure, it may be time to make a move.

Tips for Choosing a New Bank Account

Is there a required minimum balance?: Some bank accounts require a minimum balance to be held in order to waive additional fees, or earn a certain amount of interest. Some lenders have recently increased this minimum requirement. Ensure you can easily maintain your minimum balance, or seek out a banking option with no strings attached.

Is there a monthly fee?: This is the big clincher; some accounts will charge monthly fees, especially if they offer further perks, such as reward earnings, or unlimited transactions. If these features are attractive to you, ensure any fees don’t wipe out the value you’d be earning.

Does it earn interest?: This isn’t a huge selling point with chequing accounts, but there’s no harm in earning free value on your balance. For example, The Tangerine Chequing Account earns 0.25% on your total balance, compounded daily.

Are there transfer fees?: You should generally be able to move your money into various accounts with the same lender for free, but you might incur a charge if you move it to a different bank. You can also expect to pay a charge for Interac e-transfers; if you use them frequently, look for products that include a limited number for free.

Will you pay to access your cash?: Other than monthly fees, this is probably the biggest money grabber. It’s important to know how many free debit transactions are included with your banking package, whether you’ll pay to use an ABM, or whether there’s a charge for teller-assisted transactions at the branch.

Penelope Graham

A first-time homeowner and newbie investor, Penelope Graham is the quintessential millennial, navigating the world of personal finance and wealth management. A self-professed monetary policy nerd, she follows the often-controversial housing market closely and specializes in mortgage, credit card and personal finance news.

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