Understanding Bank Fees – And How to save on your bank fees

What are bank fees?

Bank fees are charges you might pay for using certain banking services. Some are one-time fees (like getting a bank draft), while others show up monthly (like account maintenance). These fees can apply to things like ATM withdrawals, account transfers or simply keeping your account up and running.

So, why do banks charge fees?

Running a bank costs money. Fees help cover the cost of things like fraud protection, customer service and keeping your accounts secure.

For Canadians who bank with RBC, for instance, those fees help provide access to valuable tools, expert advice and everyday perks that can make managing money easier. Guidance from advisors, 24/7 customer support and best-in-class technology, such as NOMI – a digital money management assistant – are just some of the benefits clients can access to get more out of their banking experience.

How much do Canadians pay for bank fees in a year?

Most Canadians pay somewhere between $200 and $300 a year in bank fees – but the range can vary a lot. It all depends on the type of account you have, how often you use it and whether your account matches your actual banking habits.

Banking fees explained

No matter what kind of account you have, chances are you’ll run into a few bank fees along the way. But what are they for, and how much might they cost you? Here’s a quick look at some of the most common types of bank fees Canadians pay.

Monthly maintenance fee

This is the fee that comes with keeping your account up and running every month. It covers the essentials – things like security and service. Some banks will waive it if you keep a certain amount of money in your account.

You may also qualify for reduced or waived fees depending on your relationship with your bank and whether you fall into certain client groups. For example, newcomers receive a one-year fee waiver with the RBC Advantage Banking account package. And youth under the age of 25 pay no fee with RBC’s Advantage Banking for Students account – even if they’re no longer in school. RBC also offers no-fee options for children 12 and under, seniors 65+ and RDSP beneficiaries.

For standard accounts without fee waivers, monthly fees typically range from $4 to $30 a month, depending on the account.

Transaction fee

Transactions include things like sending an e-Transfer, paying a bill or buying something with your debit card. Some accounts include a set number of free transactions every month – after that, there’s a fee for each additional one. The exact fee depends on the type of transaction.

ATM fee

Withdrawing cash from your bank’s ATM is usually free. But if you’re using an ATM that’s outside of your bank’s network, you could get charged a fee – either from the ATM provider, your bank or both.

Service fees

Service fees are charged for special requests or extra things that fall outside standard day-to-day banking. Examples might include fees to get a paper statement printed, to cancel a pre-authorized payment or to send wire transfers.

NSF (non-sufficient funds) fee

This fee is charged when there isn’t enough money in your account to cover a payment – like a cheque you’ve written, a pre-authorized debit or a bill payment – and the transaction gets declined. NSF fees are usually around $45, but some banks are starting to lower them.

Overdraft protection

Overdraft protection is one way to avoid an NSF fee. This is a service that prevents your transactions up to your approved limit from being declined when you don’t have enough money in your account to cover them. So, instead of a bill payment, purchase or cheque getting rejected, any shortfall (up to a certain limit) will be covered by your bank. Many banks charge a standard monthly fee for this service (often around $5/month), plus you’ll get charged overdraft interest if you use it.

Foreign transaction fee

This is a fee charged when a purchase is made in a foreign currency – like buying something from a U.S. website or using your debit card on vacation outside of Canada. It’s usually around 2.5% of the purchase amount and gets added on top of the exchange rate.

Additional banking fees

There are a few other banking fees you may come across. Here’s a rundown of some common ones.

• Credit card fees

  • Annual fee: This is the fee you pay once a year to keep your card active. The more benefits that come with your card – such as rewards, insurance or travel perks – the higher your fee will tend to be (There are also no-fee credit cards and RBC offers rebates on eligible credit cards with select bank accounts).

  • Additional card fee: This is a fee for adding a second user to your credit card account. Not all cards charge this fee, but some do.

  • Late payment charge: Late payments can cause interest charges – with most credit cards, interest ranges between 20% and 23%. The amount you pay will depend on your outstanding balance.

  • Over limit fee: Some cards will charge you a fee if you go over your credit card limit (and haven’t cleared it with your credit card issuer first).

• Investment account fees

  • Account fee: Many investment accounts come with a monthly or annual fee to keep your investment account open . If you maintain a minimum balance, this fee may be waived.

  • With investment accounts at RBC, we do not charge an account fee. Also RBC Direct Investing does not charge maintenance fees.Trading fee: This is the fee charged for making a trade through your investing account. Many platforms have a flat fee for online and mobile trades, which may be reduced if you make over a certain number of trades in a month. Some platforms offer commission-free trading. RBC does not charge a fee for trading mutual funds. There is no fee charged for a purchase of GIC.

  • Management fee: If you work with an advisor, this is the fee for them to manage your portfolio. It’s usually based on a percentage of the assets you have with them.   

  • In addition to a standard investment account, RBC also offers an account with a sliding fee structure, generally built for clients well into their investment journey – the Investment Advantage Account.

How to save on bank fees?

There are a few ways you can avoid – or at least reduce – the fees that may arise when using your bank account. Here are some tips on how to save on bank fees.

Choose the right account

A bank account that fits you – from your banking habits to your life stage – can help you save on fees. For instance, if you’re a senior, student or newcomer, you can cash in on rebates or special savings. Consider, too, choosing a High-Interest Savings Account if you’re looking for somewhere to park some cash. The interest you earn could balance out any fees you pay.

Also, more low-fee and no-fee options are on the way this year, offered by financial institutions that have signed a modernized commitment on low-cost and no-cost accounts.

Review the account’s terms and conditions

Does your chequing account come with 12 free debits in a month? Try to manage things so that you don’t go over that limit. Can you get eStatements at no cost? Consider ditching the paper statement that probably costs extra. Understanding what’s included with your account – and what’s not – is key to saving on fees.

Make use of value-added services

Remember, banking fees cover things like professional advice and useful mobile apps, which are designed to help you make the most of your money. Using these services can help you manage your cash, leverage financial opportunities and avoid potential shortfalls. In some cases, they can even help you avoid other fees – like overdraft charges or late payment penalties – by keeping you informed and on track.

Keep the required minimum balance

If your account is one that waives the monthly fee when you maintain a certain balance, try to make that amount your baseline. Just remember to consider the interest you’re earning. If it’s low, your money could be working harder in a High-Interest Savings Account or investment, where the results could make up for any fees you’re paying.

RBC accounts do not have a minimum balance requirement.

Look for rebate opportunities

Some banks offer fee waivers or rebates if you hold multiple products with them. With the RBC Value Program, for instance, you can pay as low as $0 per month for your enrolled account when you have other eligible RBC products and do simple activities like direct deposit.

Regularly review your statements

Checking your statement can help you spot fees you weren’t expecting, such as extra transaction or ATM fees or monthly charges for services you don’t use.

Set up direct deposit

Some bank accounts waive the monthly fee if you have a regular direct deposit set up for your paycheque or government benefits.

Stick to your bank’s ATMs

Using your own bank’s ATMs is usually free. But if you use another bank’s machine, you’ll likely get hit with a fee from both banks – yours and theirs. Sometimes it’s unavoidable, but if you can, make a habit of using your own bank’s network to avoid those extra charges.

Review account fees with your bank

Feeling like you’re overpaying for your account? Why not reach out to your bank? They may be able to bring down your monthly fee, suggest a different account that could save you money or otherwise reward you for your loyalty.

Bundle services

The more services you have with a bank, the more you may be able to save. For instance, having a bank account, mortgage and investment account at a single institution could lead to waived or discounted monthly fees.

Digital bank trade-offs

Digital banks often have lower fees because they don’t have the overhead of branches. That means they can offer no monthly fees, free e-transfers and even better interest rates. But there are trade-offs:

• No in-person service: If you ever need face-to-face advice or help with something more complex, support might be limited to chat, email or phone

• Depositing cash can be tricky: No branch or ATM network means you might need to send an e-Transfer or mail in a cheque to get new money into your account

• Withdrawing can cost you: Using another bank’s ATM can mean paying out-of-network fees. Even if your bank reimburses you, you’ll likely still get charged from the ATM provider

Set up bank alerts

Text and email alerts from your bank can let you know when a pre-authorized payment is about to come out, a deposit is made, or your bank balance dips below a set level. How does this help? Notifications that tell you what’s going on with your account give you the opportunity to avoid NSF charges, overdraft interest or fees for going over your transaction limit.

These alerts can also help you avoid fraud, with a real-time view of any suspicious transactions.

How much can I save on bank fees?

The amount you can save on bank fees depends on what you’re paying today, what your bank habits are and whether you qualify for any savings or rebates. Here are a few scenarios that show different ways to help you save.

Sara, a student

Sara was using a standard chequing account with an $12.95 monthly fee, without realizing her school ID could get her a student account for $0 monthly fees! After switching, she saved over $155 a year in monthly account fees alone. Her new student account also includes unlimited free Interac e-Transfers and non-bank ATM withdrawals, which comes in handy when she’s off campus or travelling.

Savings summary

Carlos, a homeowner

Carlos had his mortgage, investment account and a rewards credit card all with the same bank and was paying a $16.95 monthly fee for his bank account. Once he bundled his services, his bank waivedthe fee. Just by linking his products, Carlos is now saving more than $200 a year, with no change to how he banks.

Savings summary

Lee, a busy freelancer

Lee was using a $4/month account that came with 12 free transactions. But between debit purchases,  and bill payments, Lee was regularly hitting 20 transactions a month – and paying $1.25 each for the extras. With a few out-of-network ATM withdrawals at $3 each, that bargain account was suddenly costing over $20/month. Lee switched to a $16.95 account that includes unlimited transactions and 3 non-bank ATM withdrawals, saving both money and stress.

Savings summary