Outsmarting the big dogs: How to avoid common bank fees

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Despite all the budgeting and planning, for some of us, the end of the month means paying an extra $5 or $45 in bank fees. The extra ATM fees, transaction costs and non-sufficient fund fees add up. If we’re not careful these extra costs can blow a hole through a carefully constructed budget. Given that the average Canadian pays more than $200 in bank fees each year, keeping these costs low should be a priority. To help avoid paying extra for your banking services, we list the x most common bank fees along with strategies on how to minimize or avoid these fees.

19 Common Bank Fees

The range of penalty fees that could apply to your bank accounts varies depending on your financial institution. But here’s a list of fees you may want to watch out for.

Account Closing Fees

Some banks charge a fee if you choose to close your account within 90 to 190 days of opening it. The typical account closure fee is in the range of $20 to $50. The purpose of the fee is to discourage people from taking advantage of new customer bonuses. For more on the latest new bank offers, check out the Finder guide to best bank promotions.

How to avoid: Only open an account you intend to use. Only close an account after checking out the fees and costs for closing the account with your financial institution. Some banks will provide a bonus incentive that can offset fees charged by your old bank for closing an account.

ATM Fees

If your bank account plan doesn’t include self-serve transactions then expect to pay between $1 and $2.50 each time you use an ATM. This fee could jump an extra $1 to $5 if you use an out-of-network ATM. (An out-of-network ATM is a machine that is not part of your bank branch network or an international ABM machine).

How to avoid: Check your bank account plan to find out how many online or self-serve transactions are included. Switch accounts if you consistently go over the included amount. The goal is to find an account that charges low or no fees for the type of services you use. For more on how to avoid ATM fees, check out the Finder guide on using an ATM. When travelling be aware of non-network ATM fees, and consider using a bank card that charges no or low fees for non-network ATM transactions.

Cash Advance Fee

If you get a Visa or Mastercard cash advance at an ATM, expect to pay $3.50 or more, plus any applicable ATM machine fees.

How to avoid: Avoid taking cash advances from credit cards. Not only do you pay extra fees, but interest is charged immediately on the withdrawn sum.

Certified Cheques, Bank Drafts and Payment Processing Fees

Certified cheques and bank drafts will cost you approximately $10 to $50, depending on the financial institution.

How to avoid: It’s hard to avoid paying a fee for a certified cheque or bank draft, as virtually all financial institutions will charge for this type of payment method; however, you can reduce fees when using a bank that offers these types of payment at a reduced rate or as part of their banking plan. A good option is the RBC VIP Banking package. This account offers 12 free bank drafts each year as part of its robust banking package.

Coin Exchange Fee

If you plan to exchange rolled coins for cash at a bank where you are not a customer, expect to pay $2 for every $100 in coins exchanged. (Most financial institutions have a minimum $2 coin exchange fee.) If you are a customer, you may still be charged a rolled coin exchange fee, so ask first.

How to avoid: To avoid this fee, only exchange rolled coins at your own bank or at a branch of your home bank. If your bank charges a rolled coin exchange fee, consider the cost compared to an in-person bank transaction. If the in-person transaction fee is cheaper, consider depositing the rolled coins into your bank account, instead.

Debit Card Replacement Fee

While some money apps and financial institutions will not charge a debit card replacement fee, some banks will charge you between $5 to $10. If you need the replacement expedited, you may have to pay more for shipping fees.

How to avoid: Before leaving a store, check to make sure you have your bank or debit card in your wallet or pocket. When possible, keep a digital version for use in point-of-sale transactions. If you are prone to losing debit cards, consider opening an account with a bank that does not charge a fee for replacement cards.

Foreign Transaction Fee

Depending on your bank, you may pay a foreign transaction fee when you use your debit card overseas. This fee ranges from 1% to 3%.

How to avoid: Consider using a debit or transaction card that doesn’t charge foreign transaction fees, such as the EQ Bank Card. Another option is to bank with a financial institution that offers a bank account that waives foreign transaction fees. Good options include:

Inactive Account Fees

Banks, credit unions and financial institutions operating in Canada will charge clients who do not use their accounts after a certain period of time an inactive account fee. In most circumstances, the inactive fee is charged after 24 months of no account activity. Except to pay $20, although the fee can climb to $40 or even $50 for each inactive account. Plus, the longer an account is inactive, the higher the inactive account fee.

How to avoid: Close all inactive accounts as soon as they are no longer needed.

In-Branch Fees

Most bank accounts offer online and self-serve transactions, for free. For in-branch services, expect to pay for many transactions. For instance, going to a bank branch to get a paper statement will cost around $5, while a list of all electronic images of cheques cleared in your account could cost you $1.50.

How to avoid: If you require in-branch services, consider banking with a financial institution that includes these in-person transactions as part of their banking package.

Interac e-Transfer Fee

If your account does not include Interac e-Transfers as part of the banking package, then expect to pay $0.50 to $3.00 per Interac e-Transfer.

How to avoid: If you do a lot of cashless payments using Interac e-Transfer, then switch to a bank account that includes these transactions for free or for a small fee. Great options include online banks with no fees, such as Simplii and Tangerine.

Overdraft Fee

When you withdraw, pay bills or use more funds than what is currently in your bank account you will be charged either an NSF fee or an overdraft fee. Both fees are usually charged on a per-transaction basis, but NSF fees are generally far more expensive — $45 vs the typical $5 overdraft fee charged by most banks. Be on the look out for extended overdraft fees: banks that charge a daily penalty if you don’t restore funds to your account within 24 hours.

How to avoid: It will cost you to spend more than you have, so the best way to avoid overdraft fees is to budget accurately. If you still find your cash flow isn’t quite accurate, then it’s better to pay overdraft protection — typically a per transaction cost, an interest fee on the overdraft amount, or both. While overdraft fees can add up, they are still significantly cheaper than non-sufficient fund fees.

Monthly Maintenance / Service Fee

There are plenty of bank accounts to choose from in Canada, from banks to online banks, to credit unions, to spending accounts. Choosing the right account means considering how you will use the services offered and whether or not you end up paying extra fees for those options.

For instance, some banks expect you to always keep a certain amount of money in your account, in order to waive the monthly maintenance fee. If your balance dips below this limit, you could end up paying the monthly service fee. A few banks will charge you a minimum balance fee between $5 and $25. Banks will charge either a monthly maintenance fee or a minimum balance fee — usually not both.

Other banks charge a flat monthly maintenance fee — typical of most bank accounts at the Big 6 Banks, in Canada. Free chequing and savings accounts are also available, but be sure that any extra services you require, such as bank drafts, are available.

How to avoid: To keep monthly service fees down, it’s best to comparison shop to find the right bank account for your needs. Remember, shopping around for a bank account could save you, on average, $200 per year in monthly maintenance fees, so it pays to do a bit of research.

Money Order Fee

You can buy a money order almost anywhere — at the post office, retail stores, the supermarket and even your bank. Fees will vary but expect to pay at least $10, usually more.

How to avoid: For cheaper options, consider sending a wire transfer through a bank. Many banks charge $10 or more for a wire transfer. Some online banks offer this service for free. For instance, Simplii offers free money transfers to more than 13o countries, plus no fee chequing and savings accounts.

Non-Sufficient Funds Fee (NSF Fee)

If you write a cheque, pay a bill or make a debit card transaction and your account doesn’t have sufficient funds to cover the transaction, you can be charged a non-sufficient funds (NSF) fee. This fee can be steep, at a cost between $25 and $75, per transaction.

How to avoid: Keep tabs on your bank account balance so that potential bill payments and withdrawals don’t exceed how much you have currently in the account. If you regularly pay NSF fees, consider a bank account with overdraft protection.

Paper Statement Fee

Since most financial institutions now offer immediate and 24/7 access to your accounts using mobile apps or online portals, getting paper statements means paying a fee. If a fee is charged, it’s not steep, but on a monthly basis the $2 per paper statement fee, can add up. Keep in mind, most banks will charge $2 for a paper statement, although some will charge as much as $5 per paper statement fee. Expect to pay slightly more if you request a paper statement with a cheque image return.

How to avoid: If you need paper statements, consider finding a bank account where the monthly maintenance fee includes this service. Another option is to print out your statement from a home computer.

Personalized Cheques

Most financial institutions will not charge you for the first book of cheques. Some banks, such as Scotiabank, will provide up to 50 personalized cheques for free, once every 12 months. Other banks, such as Simplii, will provide cheques, free of charge.

How to avoid: If it’s critical to have a book of personalized cheques, then open an account that offers a free chequebook.

Stop Payment Fee

If you write a cheque or set up a bill payment and then need to cancel the payment, expect to pay a stop payment fee. This fee will vary dramatically depending on the details provided, who the payment is made out to, and the total amount of payment that must be stopped. On the low side, expect to pay $10. On the high side, expect to pay $35.

How to avoid: The easiest way to avoid this fee is to not stop a payment; however, if this is still necessary, having details is key to keeping costs lower. Cheque or payment numbers, the amount, dates and who the payment is made out to, will help reduce the administrative work required to stop the payment and reduce the fees charged for this request.

Transfer Fees

Automatic transfers between bank accounts, at the same financial institution, should be free unless it’s with a savings account that charges a fee for direct or online bank services. However, expect to pay a transfer fee if you request your old bank to transfer funds to a new bank account with a different financial institution. Most bank-to-bank transfer fees are around $20, although this fee can creep up.

How to avoid: Avoid transfer fees by doing the work yourself. Be sure to withdraw money from an old account, before closing, and depositing that money into your new account.

Wire Transfer Fees

Using a wire transfer you can instantly send money to another person, anywhere in the world. However, wire transfers will cost you. The price varies depending on whether you’re sending or receiving a transfer and whether it’s domestic or international. For incoming wire transfers, expect to pay at least $15 per transfer — unless it’s a verified Pension Payment (then the fee drops to a few dollars per transfer). No matter how you slice it, you can expect to pay anywhere from $10 to $40.

How to avoid: The easiest way to avoid wire transfer fees is to use a bank that offers low or no-fee global money transfers. For instance, Simplii provides no-fee chequing and savings accounts, as well as a no-fee wire transfer that allows customers to send money to more than 130 countries, worldwide, plus customers get cash-back rewards.

How to Avoid Bank Fees

Here are some ways you can guard against being hit by bank penalty fees:

Compare products. Compare banks to find one with the fewest fees or the lowest charges on those fees. You may have to do some digging, but some institutions offer fee-free accounts.
Read the fine print. Go through your bank account’s Fee Schedule and Product Disclosure Statement to learn applicable fees and if you can reduce or avoid them.
Contact your bank. Contact your bank to dispute charges you think are incorrect or unfair. Sometimes, all you need to do is explain your situation and ask the bank to reverse the charge.
Know the state of your accounts. Know how your income stacks up against your expenditure and never assume money due has entered your account without checking first. Regularly review your account details so you’re aware of what’s going out and coming in for each account. This will allow you to budget accordingly and could help you avoid penalty fees as a result.
Set up alerts. Turn on email or text alerts and get notified when you have a low account balance, get a direct deposit, make a withdrawal, and more.

Common bank fees you can expect at top banks

Check out the table below to compare common fees at eight banks.

Bank
Monthly maintenance fee
Non-network ATM fee
Overdraft fee
Wire transfer fee

Bank of America
$0 to $25
$2.50
$35
$0 to $40

Chase
$4.95 to $25
$2.50
$34
$15 to $50

Optum Bank
Varies by employer
$2.50
N/A
$0

TD Bank
$5.99 to $25
$3
$35
$15 to $50

U.S. Bank
$0 to $24.95
$2.50
$36
$20 to $50

Ally Bank
$0
$0
$25
$0 to $20

Citizens Bank
$0 to $25
$3
$35
$10 to $40

PNC Bank
$0 to $25
$3
$36
$0 to $45

Bottom Line

Bank fees can be a nasty surprise. The key to reducing banking costs is to know how you use your bank account and to pay monthly service fees for an account when it can reduce the cost of frequent or expensive banking transactions.

Frequently Asked Questions About Bank Fees

“How often should you monitor your bank accounts?”

You typically get a bank statement once a month, but you should monitor your accounts at least once a week to avoid fraud, keep track of your finances and see if you’re being charged sneaky fees.

“What’s the difference between an overdraft fee and a non-sufficient funds fee?”

An overdraft fee is charged when your bank processes a transaction even when you don’t have enough money. A non-sufficient funds fee is what you might pay if it denies your request.

“How do I transfer money between banks without paying a fee?”

The cost of transferring cash between bank accounts depends on what the bank offers. Here are some of the most common tools for free bank-to-bank transfers:

Electronic transfer. Many banks let you move money externally for free — you’ll just need the account and routing numbers of your recipient.
P2P transfers. Person-to-person payment tools let you send money to and fro without an extra charge.
PayPal. Move money between PayPal accounts to reach friends and family — it’s free, but instant transfer costs 1% of the transaction.

“How do I close a bank account without paying a fee?”

It’s usually possible to close a bank account without paying extra money, but it requires careful planning. Get in touch with a customer service representative beforehand to see what the bank’s policies are.

You’ll want to redirect all automatic payments and direct deposits to a new bank account first, so that you won’t be hit with overdraft fees from your old one. Check to see if your bank charges for wire or electronic transfers; if yes, you might need to look into other options such as cash withdrawal. When your old account balance hits $0, close it as soon as possible to avoid monthly maintenance fees.

This article originally appeared on FinderCA and was syndicated by MediaFeed.

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